Tuesday, August 19, 2003


I'd like to take the opportunity to say that I agreed with Paul Krugman about the difficulty of trying to simulate a competitive market in network industries characterized by such economies of scale/scope/density that the cost function is subadditive. (For further reading, see David L. Kaserman & John W. Mayo, "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," 39 Journal of Industrial Economics 483-500 (1991), and John E. Kwoka, Jr., "Vertical Economies in Electric Power: Evidence on Integration and Its Alternatives.")


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