Averch–Johnson effect

The Averch–Johnson effect is the tendency of regulated companies to engage in excessive amounts of capital accumulation in order to expand the volume of their profits. If companies' profits to capital ratio is regulated at a certain percentage then there is a strong incentive for companies to over-invest in order to increase profits overall. This investment goes beyond any optimal efficiency point for capital that the company may have calculated as higher profit is almost always desired over and above efficiency.

Excessive capital accumulation under rate-of-return regulation is informally known as gold plating.

But the so-called Averch-Johnson effect of overcapitalization does not as a general case involve "gold-plating".