Chapter 17 Promoting more efficient markets A.Business regulation:theory and practice --Regulation --Why regulate industry? --Interest-group theories of regulation --Public-utility regulation of natural monopoly --The cost of regulation 1 2023/7/17 Economics
1 2023/7/17 Economics Chapter 17 Promoting more efficient markets A.Business regulation:theory and practice --Regulation --Why regulate industry? --Interest-group theories of regulation --Public-utility regulation of natural monopoly --The cost of regulation
Regulation Regulation consists of government rules or market incentives designed to control the price,sale,or production decisions of firms. Two brands of regulation: --Economic regulation involves the control of prices,entry and exit conditions,and standards of service. --Social regulation is used to protect the environment along with the health and safety of workers and consumers. 2 2023/7117 Economics
2 2023/7/17 Economics Regulation ◼ Regulation consists of government rules or market incentives designed to control the price,sale,or production decisions of firms. ◼ Two brands of regulation: --Economic regulation involves the control of prices,entry and exit conditions,and standards of service. --Social regulation is used to protect the environment along with the health and safety of workers and consumers
Why regulate industry? Containing market power --When there are such powerful economies of scale or scope that only one firm can survive,we have a natural monopoly --Why do government sometimes regulate natural monopoly? Remedying information failures Dealing with externalities 3 2023/7117 Economics
3 2023/7/17 Economics Why regulate industry? ◼ Containing market power --When there are such powerful economies of scale or scope that only one firm can survive,we have a natural monopoly. --Why do government sometimes regulate natural monopoly? ◼ Remedying information failures ◼ Dealing with externalities
Figure 17-1 Public-utility regulation of natural monopoly Pm Pr 人 AC Pc -MC MR Qm Qr Qc 4 2023/7117 Economics
4 2023/7/17 Economics Figure 17-1 Public-utility regulation of natural monopoly O Q P AC MC MR Qr Qc Pr Pc E F Qm Pm H
The costs of regulation Decline of economic regulation Pioneering deregulation in the airline industry Deregulation:an unfinished story 5 2023/7117 Economics
5 2023/7/17 Economics The costs of regulation ◼ Decline of economic regulation ◼ Pioneering deregulation in the airline industry ◼ Deregulation: an unfinished story
B.Antitrust policy The framework statutes --Sherman Act(1890) --Clayton Act(1914) --Federal Trade Commission Basic issues in antitrust:conduct and structure Antitrust laws and efficiency 6 2023/7117 Economics
6 2023/7/17 Economics B.Antitrust policy ◼ The framework statutes --Sherman Act(1890) --Clayton Act(1914) --Federal Trade Commission ◼ Basic issues in antitrust:conduct and structure ◼ Antitrust laws and efficiency
lllegal conduct are limited by antitrust laws: Certain kinds of collusive behavior. Agreements among competing firms to fix prices,restrict output,or divide markets. ■Predatory pricing(掠夺性定价) ■Tying contract(捆绑性合同) ■Price discrimination(价格歧视) 7 2023/7117 Economics
7 2023/7/17 Economics Illegal conduct are limited by antitrust laws: ◼ Certain kinds of collusive behavior. ◼ Agreements among competing firms to fix prices,restrict output,or divide markets. ◼ Predatory pricing(掠夺性定价） ◼ Tying contract(捆绑性合同） ◼ Price discrimination(价格歧视）
Some structural cases ■The AT&T(美国电报电话公司)case and the Bell Doctrine ■The IBM(国际商用机器公司)case ■The microsoft(微软)case 8 2023/7117 Economics
8 2023/7/17 Economics Some structural cases ◼ The AT&T(美国电报电话公司） case and the Bell Doctrine ◼ The IBM （国际商用机器公司）case ◼ The microsoft （微软） case
Mergers:law and practice Horizontal mergers-in which companies in the same industry combine. Vertical mergers occur when two firms at different stages of the production process come together. Conglomerate mergers when some unrelated businesses join together. 9 2023/7117 Economics
9 2023/7/17 Economics Mergers: law and practice ◼ Horizontal mergers—in which companies in the same industry combine. ◼ Vertical mergers occur when two firms at different stages of the production process come together. ◼ Conglomerate mergers when some unrelated businesses join together