480593
Description
Mind Map by usman ahmed, updated more than 1 year ago
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Created by usman ahmed
almost 11 years ago
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Chapter 6 -
Competition Policy
& contestable
markets
- OFT - investigates and refers to CC
- OFGEM-energy
- OFWAT
- water
- OFCOM -
communication
- OFGEM-energy
- CC - takes action against OFT referals
- Compulsory breaking up
- tax on windfall profits
- nationalisation
- regulation
- price controls - e.g. RPI-X
- Licensing
- Rate of return
- yardstick
- price controls - e.g. RPI-X
- Merged from april 2014, call CMA
- Compulsory breaking up
- Monopolies with M.S >
40% investigated by OFT
- Mergers - if
M.S>25% leads to
referral to CC
- Restrictive
practices
- Discriminatory
prices - "buy
more"
- Resale price
maintenance -
price to sell at
is fixed
- Full line forcing
- Refuse to supply
- Discriminatory
prices - "buy
more"
- Takeover panel
- Competition policy
- Privatisation
- selling local
authority assets
- Advantages:
1. Promote efficiency
2. Promote competition
3. reduce size of public
sector encourage
4. enterprise culture
- Disadvantages: 1.
Worse allocation of
resources 2. ignore
externalities 3. Closure
of loss making service 4.
Short termism
- state monopoly become
private monopoly e.g. BT
- efficiency gains come from
firing workers e.g royal mail
- state monopoly become
private monopoly e.g. BT
- should be
accompanied
by de regulation
- selling local
authority assets
- Nationalisation
- Advantages: 1.take
externalities into account 2.
better management 3.
natural monopoly better in
public 4. commanding
heights 5. Lower costs 6.
fairer distribution of
resources
- Disadvantages: 1. no incentive for
efficiency 2. less choice and quality 3.
lack of innovation 4. can reduce public
spending
- Advantages: 1.take
externalities into account 2.
better management 3.
natural monopoly better in
public 4. commanding
heights 5. Lower costs 6.
fairer distribution of
resources
- PFI's
- Deregulation
- makes market more
contestanle e.g. BT
distribution network
- makes market more
contestanle e.g. BT
distribution network
- licensing
- internal markets
- In favour
- poor performers ended
- quality driven up
- greater efficiency
- poor performers ended
- Against
- poor performers
deprived of resources
needed for improvement
- market failure possible.e.g.
parents cant choose school
because of less info
- equitable: new hospital not local
- hospital/school has monopoly position
- poor performers
deprived of resources
needed for improvement
- In favour
- Privatisation
- Contestable markets
- super pi only in short run
- barriers to entry
- level of sunk costs
- strategic
and innocent
- patents
- integration
- incumbent firms(they
have econ of scale)
- trade restrictions
- Capital costs(use
2nd hand market?)
- asymetric info - incumbents
know more about industry
than new entrant
- level of sunk costs
- Criticisms of theory
- technical knowedge
needed not freely
available/too high
- sunk costs are
very high in reality
- technical knowedge
needed not freely
available/too high
- hit and run
- super pi only in short run
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