Market Failure 2 Flashcards
What is the Competition and Markets Authority
Government agency for advising on and implementing UK competition policy
What is public ownership
Ownership of industries, firms and other assets by central/local government
What is Contractualisation
Services that were previously provided by the public sector, are put to private sector tender and provided by private sector firms
eg. road cleaning/refuse collection
What is Marketisation / Commercialisation
The provision of goods and services is shifted from the non-market sector into the market sector of the economy
What is a Public-Private partnership
Partnership between the private and public sectors to provide public services
What is a private finances initiative
The government seeks tenders from the private sector for designing, building, financing and running infrastructure projects
Define Regulation
The imposition of rules and other constraints which restrict freedom of economic action
Define Regulatory Capture
Occurs when regulatory agencies act in the interest of regulated firms rather than on behalf of the consumers they are supposed to protect
What does Contestable Market Theory say about Monopoly Policy
There is no need for increased levels of competition if markets are contestable.
CMT states that as long as the necessary parameters are in place (absence of sunk costs and the threat of hit and run entry) the consumers will benefit from contestable markets.
What does Merger Policy deal with
Takeovers/mergers that might create a new monopoly
What is a takeover
Involuntary coming together of 2+ firms
The ‘victim’ being acquired in a hostile takeover
What is a merger
The voluntary coming together of 2+ firms
How does the CMA decide what mergers/takeovers to investigate
Keeps itself informed of all merger situations that might be eligible on the grounds of public interest
A merger/takeover is eligible if it is expected to cause a substantial lessening of competition (SLC)
Explain the structure of competition authorities in the UK
The CMA is at the top - Competition and Markets Authority
Then there are Regulatory Bodies inside the CMA that specialize for diff. industries
ORR - For Railways
CAA - Airports
OFCOM - Telecommunications
What are the 5 aims of competition policy
- Prevent Excessive pricing
- Promote competition
- Ensure quality/choice/standards
- Regulate natural monopolies
- Promote technological innovation
