Natural monopolies exist when the nature of the good or service makes

Another one of these newer forms of regulation is called price cap regulation. In this version, firms can choose their own prices under constraints, that is, they must be under a certain number. This method gives incentive to minimize costs but it gives up "rents;" if the firms do well it gives up money to the government.

it inefficient for more than one firm to produce it. Some common examples of this are railways, pipelines, electric grids, and local phone loops. In certain cases, competition can be preserved by allowing other firms access to their facilities. For example, railways can allow other trains and phone companies can allow use of their networks to long distance providers. Professor Laffonte notes that some critics reject the theory of natural monopoly as an invention of economists. In many of these cases, however, deregulation ends up requiring mor

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