Source: wikibot/averch-johnson-effect
= Averch–Johnson effect
{wiki=Averch–Johnson_effect}
The Averch–Johnson effect is an economic phenomenon observed in the context of regulated utilities, particularly in industries like electricity or gas. It describes the tendency for regulated firms to over-invest in capital relative to what would be considered efficient or optimal. This effect arises when regulatory frameworks allow firms to earn a return on their invested capital.