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• 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.
X-inefficiency
• Additional cost of a monopoly
• Utilisation of existing resources
• Labour productivity
• Time and effort for research
Technological advancement
• Incentive
• Means
Deregulation
• Removal of barriers to entry.
• 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.
• 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.
• 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.
• Indirect government intervention
• Restrictive practices
• Abuse of a dominant position.
• National Economic Development and Labour Council
(NEDLAC)
• Competition Act
– Competition Commission
– Rationale for the policy
– Objective of the policy
– Focus of the policy.
• Efficiency hypothesis
– Harold Demsetz
• Contestable industries and markets
– Potential vs actual competition
– Global competition.
Pe5e chapter 04 v1.0

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Pe5e chapter 04 v1.0

  • 1.
  • 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.
  • 3.
  • 4.
  • 5.
  • 6. X-inefficiency • Additional cost of a monopoly • Utilisation of existing resources • Labour productivity • Time and effort for research Technological advancement • Incentive • Means Deregulation • Removal of barriers to entry.
  • 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.
  • 8.
  • 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.
  • 10.
  • 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.
  • 12. • Indirect government intervention • Restrictive practices • Abuse of a dominant position.
  • 13. • National Economic Development and Labour Council (NEDLAC) • Competition Act – Competition Commission – Rationale for the policy – Objective of the policy – Focus of the policy.
  • 14. • Efficiency hypothesis – Harold Demsetz • Contestable industries and markets – Potential vs actual competition – Global competition.