This module covers two areas in which government agencies affect the behaviour of firms. Economic regulation concerns industries which are, or were believed to be, natural monopolies, in which costs are minimised if a single firm provides a product or services, typically because a physical network is used for delivery and it would be expensive to duplicate this. Nowadays, networks may be opened up to other companies, allowing competition in some parts of the industry. Regulators have to set the level and approve the structure of charges for using the network, and perhaps for the product, and may also oversee the behaviour of the firms in the competitive parts of the industry. The module will cover the ways in which this is done.
Competition policy concerns other industries in which a firm or a few firms, has a dominant position. Competition agencies can investigate their conduct and impose remedies for the abuse of such a position, and can also prevent or amend mergers which might create or strengthen one. The module will cover a number of ways in which a dominant position might be abused (which means it will cover some oligopoly theory) and suitable remedies.
Method of assessment:
A two-hour written examination (70%) and a project which will require students to assess an actual decision made by an economic regulator or competition agency (30%)