Regulation public utilities
4 important questions on Regulation public utilities
How does price regulation work?
What are de conditions of perfect competition?
- No information asymmetries
- Small producers
- relative to market size
- act independently
- Homogeneous products
- No barriers to entry
- Buyers act independently
What are the determinants of market concentration?
- Economies of scale (average cost decreasing with production)
- Network effects (attracting critical masses)
- Abusive barriers to entry (margin squeeze, advertisements)
- Legal barriers (licensing)
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What are the regulatory concerns for public utilities?
- Fostering efficiency (allocative and dynamic)
- facilitating investment and managing long-term contracts
- internalities and knowledge problem
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