3.6.1 - government intervention

4 things the government can intervene for from theme 3

monopolies

mergers

competition + contestability

protect suppliers + workers

4 ways to intervene in monopoly markets

price regulation - max price set at allocative efficiency

profit regulation - limit snp (difficult bc firms can inflate perceived costs, or can keep them high since its a monopoly so no incentive)

quality standards - keep firms from using bad quality stuff to cut costs

performance targets - eg. on time trains

who does intervention to control mergers

UK: Competition and Markets Authority

EU: European Competition Commission

USA: Antitrust Commission

what does the CMA usually do in mergers

prevent any single firm from gaining more than 25% market share

4 ways to intervene to promote competition + contestability

promote small businesses - subsidies, tax incentives = more new firms in market

deregulation - less barriers to entry = more new firms in market

competitive tendering - outsourcing gov contracts to the priv sector = more priv sector activity = more firms in the market

privatisation - easier to compete with priv firm than one dominant gov firm = more firms in the market

what is competitive tendering for government contracts

when the gov draws up a specification for a g/s it wants to provide and recieves bids from priv firms to provide it

how the gov intervene to protect suppliers

anti-monopsony laws eg. min prices buyers have to pay suppliers

subsidise firms suffering from abusive monopsony power

nationalise the abusive firm to better treat suppliers

gov intervention to protect employees

trade unions

national min wage

working conditions laws