Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
8:
Competition policy /
Regulation
(Chapter 10 pg.322 - 332 & Smit)
Monopoly:
Supply curve?
P > MR and P > MC
Conclusion:
Price: Pm > Pc
Output: Qm < Qc
2. Redistribution:
Monopoly gains
PmPcO3O1 at
expense of consumer
Consumer pays higher
prices for fewer goods
Unfair or socially
unacceptable
distribution of income
and wealth.
Fig. 3.2
Continue
3. Production efficiency:
Production efficiency:
firm produces at
minimum ATC.
4. Rent seeking:
Monopolies more
profitable than perfect
competition
Achieved under
perfect competition
Why?
Incentive to attempt to
create monopoly
activity called rent
seeking.
Monopoly maximizes
profit not efficiency!!
Options:
Continue
5. No incentive to
innovate:
Why?
7. Sub-standard (poor)
quality of products:
No substitutes
6. Managerial
inefficiencies:
No competition
8. Political power:
Large firms has
significant economic and
political power
Fear of dictating
economic policy.
Figure 3.4
Continue
2.
Incentive to innovate:
Innovation (research) is very expensive dominant
firms can finance
Large firms are important in speeding the process of
diffusion of technological advances.
Why cant competitive firms innovate?
3.
Misconception of monopolies
Continue
1. Goverment ownership and management
P = MC
X-inefficient
2.Government regulation of private monoply
Profit regulation
Fig.10.22
Gold-plated water cooler effect
1.
Price regulation
Continue
2. Profit regulation
3. Output regulation
Regulation (cont)
3.Exclusive Contracting for a natural
monopoly
- Contract to the lowest cost firm
4.Enforcment of Competition policy
5.Laissez-faire policy towards natural
monopoly
Fig. 10.24