The privatization of Chile`s public utilities has led to substantial new investment and improvements in internal efficiency. However, the limited information available to regulators, combined with their insufficient technical capacity, have combined to prevent efficiency increases being fully passed on to consumers in price reductions. In fact, drastic price cuts have occurred only where competition
This note provides a simple but powerful graphical analysis of the gains from factor movements. The analysis can be extended to general settings which include differentiated products and nontraded goods.