monopoly regulation, competition policy Flashcards
examples of monopoly regulation
-price regulation, RPI (not allowed to increase above inflation), RPI-X (restrict level by which firms can restrict below inflation), RPI +-k (K is percentage whereby enough profits can be made to allow for capital investment). max price at pc qc but: level of X?K, cost, incentive to keep x low, regulatory capture ( best regulators used to work in industry, become good friends and stop it becoming strict enough)
-quality control/performance targets (trains(delays), gas, electricity can’t cut if they can’t pay) but unintended consequences, GP seeing set number they may took shortcuts, game the system: extend journey times
-profit control and regulation, covering cots and adding % change on capital employed but: asymmetric info, incentive to increases costs and over employ capital
-windfall taxes on profit (tax by government on companies where they were not responsible) but: increase cost, shifting MC up, worsening monopoly outcomes, tax evasion and avoidance, less innovation, under-reporting profit
evaluation of competition policy
level of info
cost vs benefits
regulatory capture
benefits of monopoly
