Comp policy, Privatisation,Public Ownerhsip,Regulation,Deregulation of markets Flashcards
Competition Policy
Govt policy that aims to make markets more competitive and ensure the public interest is protected.
When enacts competition policy?
CMA
What is the CMA
the government agency responsible for overseeing competition policy
The four key types of regulations used
- compulsory break-up
- price regulation
- profit regulation
- taxation
- state ownership
why would CMA investigate mergers
- combined market share of over 25%
- combined annual turnover over 70mil
Price regulation
- limits how much a firm can increase its prices to protect consumers from extortion. Sets at allocative efficiency point.
Regulatory capture
when a regulator starts to favour the company they are regulating
EG: when Bp was being regulated, the regulators were charmed by the staff and gave them free permits to drill for oil in the Gulf of Mexico without checking it was safe and weeks later they suffered an oil spill.
Profit regulation
Limiting SPN profit
Taxation
Imposing windfall taxes which would lead to an increase in the cost of production, resulting in higher
CMA interfering in UK Energy prices
In 2014, the CMA investigated the UK Energy Market in an attempt to increase competition and improve the consumer experience.
In 2016, they introduced measures to support consumers in the UK Energy Market, for example, supporting price comparison websites to help consumers identify the cheapest energy supplier.
Public ownership
Government ownership of firms, industries other assets
Nationalisation
the transfer of assets from private sector into public ownership (often public & demerit goods)
For Public Ownership
- provisions of goods that may not be provided or would be under provided
- prioritise social welfare over profit (allocative efficiency)
- Less to be market failure from externalities as govt maximises social welfare
- greater economies of scale
Against Public Ownership
- Diseconomies of scale - company become too huge
- lack of SPN (burdens on taxpayers, national debt, govt can’t afford it/ opp cost?)
- lack of competition so inefficient -> higher prices
Eval for public ownership
- Are public private partnerships better? You get both benefits
- Is regulation better way of dealing?
- If theres high comp in private sector no need for nationalisation
Privatisation
the transfer of assets from the public sector to the private sector
For Privatisation
- Allocative efficiency rising
- Create short term tax revenue for govt (‘privatisation era’ in 1980’s)
- X inefficiency decreases
Against Privatisation
- ## Exploitation of monopoly power
Regulation
Imposition of rules and laws that restrict market freedom
