The whole capped profit creates the distortions you illustrate. The effect has a name: the Averch–Johnson effect, named after the Harvey Averch and Leland John

The whole capped profit creates the distortions you illustrate. The effect has a name: the Averch–Johnson effect, named after the Harvey Averch and Leland Johnson paper: "Behavior of the Firm Under Regulatory Constraint" Fun stuff: https://en.wikipedia.org/wiki/Averch%E2%80%93Johnson_effect https://en.wikipedia.org/wiki/Averch%E2%80%93Johnson_effect