Competiton Policy

Question 1

Competition policy

Answer 1

Designed to correct problems that arise when firms behave in an anti competitive manner as a result of the abuse of monopoly power

Question 2

How firms can a use power (7)

Answer 2

• Limit output
• High prices
• Predatory pricing
• Merger/ Takeover
• Vertical integration
• BTE: prevent competition
• Collusion

Question 3

What do the CMA do? (5)

Answer 3

• Investigate mergers
• Investigate problems in markets
• Take action against anti competitive behaviour
• Protect unfair trading
• Encourage gov and other regulators to use competition effectively on behalf of consumers

Question 4

Aims of competition policy (3)

Answer 4

• Increases competition
• Make markets work better
• Improve efficiency in individual markets

Question 5

What regulators do (4)

Answer 5

• Monitor and regulating pricing
• Standard of customer service
• Open markets
• Surrogate competitor

Question 6

Costs of competition policy (3)

Answer 6

• Reduce creative destruction (ability to be dynamically efficient)
• Prevent EOS from big firms
• Government failure

Question 7

Benefits of competition policy (4)

Answer 7

• Lower prices
• Improved quality
• Increased choice
• Innovation

Question 8

Is regulation always needed?

Answer 8

Regulation isn’t always needed if the market is contestable.

Even monopoly markets can be contestable if there is a credible threat of entry