sold by the firm? This fixed cost is presumably large as the motivation for regulating the firm is its monopoly power, protected by the reluctance of entrants to duplicate the fixed cost. Boiteux showed that regulated firms should exhibit a price structure similar to that of ordinary, unregulated ones: in equation (1), the price pi in segment i should be low if the segment is cheap to serve (the cost ci is low), and has a high elasticity of demand ηi (that is, if a price increase implies a substantial reduction in demand)14. As the fixed production cost to be covered through markups increases, these markups also increase (i.e. θ increases). Thus, regulated prices should be “business oriented”, similar to, but overall lower than those set by an unregulated monopoly (for whom the coefficient θ would be equal to 1.