Why do you suppose regulators are allowed by their legislative mandates considerable flexibility with respect to pricing, but are not allowed to subsidize firms out of general revenues? What are a regulated firm’s incentives to act anticompetitively in competitive markets when its monopoly market is regulated using price caps? Does it have the same incentives as a firm subject to cost-based regulation? Explain. Can you think of how implementation of price-cap regulation might create incentives for anticompetitive behavior?