The regulation or control of monopoly is being reconsidered today in economies as different as those of China and Singapore, or the United States and the Soviet Union. Beneath catchwords like privatization, liberalization, deregulation, or perestroika lies a fuller awareness of the pitfalls in both private and public ownership of monopoly enterprises than ever existed before. Governments seem willing to consider introducing new institutions on the basis of their expected effects rather than their ideological bloodlines alone, and to undertake radical reform. It is a good time to consider the purposes of regulatory institutions and to attend to their design.

There is a vast economics literature on optimal pricing and technological choices. Anyone at all familiar with it must be struck by how it seems to differ from daily experience. One of our aims here is to present a large portion of that admirable normative material, in up-to-date form, and to explain the welfare representations underlying it. But we also want to stress that little has been done to adopt means of pursuing welfar goals in the absence of competition. Our institutions of monopoly regulation were not carefully designed for pursuing economic welfare or efficiency, at least not by today's standards. Experiments with new institutions of monopoly regulation will be valuable in the challenging design task that remains to be accomplished.

This book was begun more than five years ago as a set of notes for a graduate course in regulation at the University of Virginia. Only elementary mathematics, mainly calculus, is employed, frequently in straightforward constrained optimization problems.