Regulation

Competition & Markets Authority

Provides regulation and competition policy in the market

Merger Policy

A policy created to investigate two firms from merging that will have too much market power.

Price Regulation

Used to limit a firm’s price on their goods and services.

Regulatory Capture

When regulators grow too fond of the firms they are regulating.

Profit Regulation

Sets a cap for firms profit and after that profit cap has been exceeded it is all sent to the government. Can be used to force investment back into the firm with remaining profits or collect tax. However, removes profit incentives.

Performance targets and quality standards

Setting a standard so that firms can keep quality and performance high for their consumers.

Increase contestability

• Lower barriers to entry so that more firms can enter and contest the market to push competition.

Methods to promote contestability

• Deregulation

• Privatisation

• Stopping anti-competitive practices

• Helping small businesses grow

Deregulation

Removing regulation to lower barriers to entry such as taxis removing rules needed to become a taxi driver.

Privatisation

Transition a sector from a government owned sector to a private sector.

Privatisation benefit

• Improved quality of service/goods

• Lower prices

• Increased efficiency

Competitive Tendering

Auctioning certain parts of a public sector to private firms to improve efficiency in a sector without fully privatizing it. Like catering for NHS.

Anti-competitive practices

Actions used by firms to restrict competition such as

• Predatory pricing (pricing below AVC) to cut out competitors

• Collusion (two or more firms agree to limit competition)

Subsidy

Providing financial assistance to a firm which drops MC and AC curve and hence dropping prices to compete prices against old incumbent firms