6.1 Government Intervention Flashcards
(17 cards)
Main aims of competition policy?
1) Eliminate cartels
2) Market Liberalisation
3) Merger Control
Govt intervention to control mergers?
1) CMA has authority to examine if over £70m or 25% share
2) Can block merger
3) Ensure consumer welfare
Examples of merger policy action?
1) CMA blocked Sainsburys & Asda
2) CMA cleared merger of Co-Op and NISA
Govt intervention to control monopolies?
1) Tax on profits
2) Forced de-mergers
3) Introduce price caps
4) Liberalisation
Arguments for price capping?
- Improve consumer welfare
- Curb monopoly power
- Improve productive efficiency
Arguments against price capping?
- Job losses
- Distorts price mechanism
- Possibly insufficient information for caps
Examples of industry regulators?
1) CMA
2) Ofgem (energy markets)
3) Ofwat (water monopolies)
Govt intervention to promote contestability?
1) De-regulation
2) Privastisation (& contracting out)
3) Nationalisation
What is De-regulation?
Lowering barriers of entry to liberalise a market
(e.g. end of Royal Mail legal monopoly)
Advantages of De-regulation?
1) Lower prices
2) Improved efficiency
3) Less pricing power
Arguments for Privatisation?
- Increased efficiency
- Govt revenue from sale
- Shareholder democracy
- Lower prices
Arguments against Privatisation?
- Social efficiency less important
- Future govt loss
- Anti-competitive practice
Benefits of contracting out?
- More competitive
- Efficiency
- Innovation
Drawbacks of contracting out?
- Sacrifice quality
- Poorer employment practices
- Possible collusion
Benefits of nationalisation?
- Social efficiency
- Lower prices
- Economies of scale
- Use for macroeconomic objectives
Drawbacks of nationalisation?
- Diseconomies of scale
- X-inefficiency
- Lack of innovation
Govt intervention to promote small business?
- Start-up Loans
- Growth Hubs
- Exporting is Great
