Chapter 4 discuss the social costs of a monopoly and indicate its relevance for deregulation, outline the characteristic features of a natural monopoly, discuss the case for and against regulating a natural monopoly, explain the meaning of the structure-conductperformance (SCP) hypothesis and discuss its relevance for competition policy in South Africa, explain Demsetz’s efficiency hypothesis and discuss its relevance for competition policy generally.
Trang 2• Discuss the social costs of a monopoly and indicate
its relevance for ‘deregulation’
• Outline the characteristic features of a natural
monopoly
• Discuss the case for and against regulating a natural
monopoly
• Explain the meaning of the
‘structure-conduct-performance’ (SCP) hypothesis and discuss its
relevance for competition policy in South Africa
• Explain Demsetz’s ‘efficiency hypothesis’ and discuss
its relevance for competition policy generally
Trang 6• Additional cost of a monopoly
• Utilisation of existing resources
• Labour productivity
• Time and effort for research
Technological advancement
• Incentive
Deregulation
• Removal of barriers to entry
Trang 7• Natural monopoly
– Large capital outlay
– Examples: provision of water, electricity, rail & road transport, postal services
• Increasing returns to scale
• Privatisation
• Regulatory measures
• Regulation
• Efficiency gains
• Regulated privatisation
Trang 9• Monopolistic competition
– Firms produce close substitutes and each firm has some control over price
• Oligopoly
– Only a few firms produce a homogeneous product and each one has considerable control over price
• Tendency for:
– Higher equilibrium quantities at lower equilibrium prices – Lower quantities at higher prices.
Trang 11• Highly concentrated industry
• Correlation between the degree of concentration and
profitability of industries
• Power of highly concentrated industries
The structure of an industry determines the conduct of its constituent firms, which in turn, determines their
performance
Trang 12• Indirect government intervention
• Restrictive practices
• Abuse of a dominant position
Trang 13• National Economic Development and Labour Council
(NEDLAC)
• Competition Act
– Competition Commission
– Rationale for the policy
– Objective of the policy
– Focus of the policy.
Trang 14• Efficiency hypothesis
– Harold Demsetz
• Contestable industries and markets
– Potential vs actual competition
– Global competition.