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Goldberg, V. P. (1976). ‘Regulation and administered contracts’. Bell Journal of Economics 7(2): 426.
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Some of the regulatory problems perceived by economists are the result of stacking regulatory outcomes against irrelevant standards generated by models which surpress the contractual complexities inherent in the so called natural monopoly sector. The administered contracts (AC) approach justifies regulation on long term relational matters. In this broader context, the observed emphasis by regulatory agencies on protection from competition has a plausible explanation. The AC approach opens up new areas of search for innovations in regulatory institutions by placing greater emphasis on mechanisms for maintaining, adjusting, and terminating long term relationships. A second source of innovation is observation of the behaviour of privately contracting parties. Economic theory generally ignores the complexity of contractual arrangements by assuming that most exchange takes place in the discrete transaction form.