application Flashcards
(14 cards)
UK state owned businesses
- channel 4
- BBC
- railway network*
- network rail- rail infastricture management
- British business bank - created in nov 2024 supporting small and medium sized businesses
- scot rail- passenger train services in Scotland nationalised 2022
- Scunthorpe steel*
evaluation
Cost of living pressures- addressed by state ownership
Investment in infrastructure over short-term profits (Thames Water)
will it effect…
Dynamic Efficiency: Will public ownership drive innovation?
Consumer Welfare: Are services improved and affordable?
Equity: Will outcomes (over time) be fairer across society?
Top Tip:Arguments should be judgedcase-by-casebased on market failures and long-term needs of an economy.
examples of recently privatised businesses
- Royal Mail
- castle water
- Lloyd banking group( bailout 2008 fully privatised 2017
- northern rock ( bailed out nationalised 2008)- sold to virgin money in 2011
evaluation
Ownership is NOT Everything:
Private firms are not always more efficient.
Efficiency depends oncontestabilityandcompetition, not ownership.
Domestic Monopolies Still Face Competition:
E.g., UK broadband services face competition from new challengers even if infrastructure is monopolised.
Top Tip:Analysemarket structure,competition, andincentives- not just ownership labels!
industries where there is price capping
energy price cap- set by OFGEM until oct 2024
rail fares- for certain tickets- off peak returns July RPI+1%
telecommunications BT open reach
BT openreach quasi natural monopoly *
fibre broadband networks in uk- bt open reach - 14,800 premises , next= city fibre 3,400
fixed costs high
BT open reach- regulated
eval
Some industries in the UK, like rail and energy, are subject to price capping because they show characteristics of natural monopolies.
An industry regulator such as Ofcom or Ofgem is a surrogate competitor.
Where markets are truly contestable, state intervention through price regulation is perhaps less justified.
A good example is broadband. Infrastructure charges are regulated but service providers such as Sky & Virgin Media are not because OFCOM believes there is sufficient competition
market share broadband internet
BT 24% but owns EE and plus net so 35%
sky 19%
contestable oligopoly
social tariff eval
Social tariffs – companies providing cheaper prices for families on low incomes / people on universal credit.
This is a type of third-degree price discrimination.
Social tariffs are superb application when discussing the welfare costs and benefits of monopoly / oligopoly power.
Judge a monopoly by outcomes rather than textbook theory.
sky and BT
duopoly’s
boeing and airbus
mastercard and visa
shell and BP - EV charging
inpost and amazon
contestable oligopoly
Contestable Oligopoly
Intense price & non-price competition between suppliers and
Each operating at scale to reap benefits of economies of scale.
and
Threat from challengers helps to keep prices low
eco efficiency and market structures
contesable markets
- parcel couriers
- low cost airlines
- coffee shops and cafes
low cost gyms
Non-price competition such as 24 seven access, app which shows how busy it is, loyalty perks discounts fitness gear
price comp - 12-20, no LT contracts - low sunk costs for consumers
- clothes retailing
technical Econ scale- self service checkout, capital to make clothes
purchasing Econ scale, cotton
Purchasing Economies:
Bulk-buying materials = lower unit costs
Strong monopsony power
Financial Economies:
Access to cheaper borrowing for expansion
Technical Economies:
Largest store (Birmingham) uses advanced stock management = higher productive efficiency
Risk-Bearing Economies:
Geographical diversification stabilises revenue streams
monopsony power for amazon
Amazon can demand lower prices, better terms, and exclusive deals from manufacturers, wholesalers, and distributors.
Amazon can dictate fees, commissions, and other terms to third-party sellers such as tutor2u
Scotland price cap
Scotland introduced rent caps in 2022 to limit increases for existing tenants during the cost-of-living crisis.
