MICROECONOMIC

The Regulation Policy for Natural Monopoly Industries

BASSAM RAWEH
LY2013027

Introduction
Natural monopoly is one of the basic concepts in economics management of natural monopolies
Theory has also been one of the classic economic theory. Depending on the context of the times
Natural monopoly theory people determine what industry is a natural monopoly industries
thus adopt different governance policies. From the development history
The natural monopoly theory has never experienced the natural conditions Conclusion economies of
scale economies of scope and cost subadditivity three stages of development the level of awareness has
been increasing. However, we also see that this theory Progress on still stay within the traditional
framework of the theory of natural monopoly, because And it is difficult to effectively interpret today's
world of natural monopoly industry reform now Real so that theory and reality a huge contrast.
Before Century era according to existing theory and its natural monopoly
Policy conclusions natural monopoly industries operating countries the prevalence of poor
quality price High and severe losses. Consumers not only failed to enjoy the natural monopoly
machine System should bring economies of scale economies of scope and cost subadditivity
benefits Instead suffered Zhicijiagao drawbacks of other monopoly the government only
increased the A large number of regulatory costs, but also had to bear the huge business
losses.
Theory and reality has led to a huge contrast! Since the Century era Western hair
Up country took the lead on the traditional natural monopoly industry sweeping reforms of its
the most important step is to break the monopoly the introduction of competition. All Natural
monopoly industries worldwide deregulation the introduction of competition reform tide Flow
urgent need for new theories to be guided.
Therefore, the existing natural ridge Depth reflection off the theory, the development of new
theory of natural monopoly to enhance the Explanatory power of economic practice has become
one of the main tasks of economists. This article is an attempt to make this I hope to be able to
manage the natural monopoly on the further development and deepening of the reform of
natural monopoly industry provide useful.

Content and Innovation

2.1 trinity of "natural monopolies New Theory Already proved in theory economies of scale are
neither A necessary condition for a natural monopoly nor is it sufficient condition that Why
associated with this natural monopoly theory and the corresponding regulatory affairs
Policy would have met the challenge. The project on the natural conditions in determinism
Basis of economies of scale economies of scope cost subadditivity Evolution theory of natural
monopoly review on by France if Empirical Study of Dry industry found a real natural monopoly
industries Monopoly sectors largely related to network economy. In Drawing on the basis of
existing research results the project clearly Strictly excellent total value or total social utility and
social net income Additive is than the existing better define the natural cost subadditivity

The concept of monopoly and further proposed to economies of scale (economies of

scale)economies of scope (economies of scope) and the Network Economy (economies of
network) three Integration the establishment of supply and demand analysis analysis regulation
Economies of scale, economies of scope, network economy "Trinity" and "self
However, the new theory of monopoly "(neo theory of natural monopoly ). This theory has been
completed, and its main results are has been published.
2.2 micro-regulation and macro-control under the conditions of market economy government
intervention against market failure Pre-including macro-control and Micro Regulation two main
aspects. I they all belong to the past is customary to have called for government intervention
the proportion of "macro" in fact really belongs to the macro-control and little more of a microregulation. Clearly this division for real Government intervention is applied correctly is important
because between them at the appropriate should the field government targets tools methods
legal framework.
The implementation of machine Structure and other aspects have a significant difference. This
paper studies the natural monopoly industry regulation in each Mechanism species regulation
methods and policies, objectives, policy tools And other core content, such as price regulation
into regulation, investment regulation Etc; focus on the typical way of natural monopoly industry
regulation Including traditional yield regulation, issued after the 1980s Show up such as price
cap regulation franchise bidding, benchmarking competition Dispute and other incentive
regulation, multi-product of natural monopoly pricing Ram sey pricing methods, as well as those
of their respective regulatory approach Strengths and weaknesses, with particular emphasis on
the costs and benefits of regulation angle into Line research.
2.3 Competitive business and monopolistic business In-depth study will find that natural
monopoly industry is none often general concept. With the development of science and
technology and social pipe Improve the management level, past the so-called natural monopoly
industries, such as iron Road petroleum aviation electricity etc.
Which really is a natural monopoly less and less business more and more competitive business,
therefore the key question is how to make competitive business full competition from
the only effective monopoly business regulation. Further research Study found that the
monopoly business and related industries because of the network economy Factors are closely
related. As a result, it is necessary to put the network economy and Study together the
economies of scale and scope economies, and especially sudden the significance and role of
the Internet economy. In the future government regulation of natural monopolies heavy
industries Point just monopolistic business, and should be incorporated into the rest of the
competitive business, "Antitrust Law" adjustment range.
2.4 Natural Monopoly Regulatory Reform major errors exist
(1) Natural monopoly industry need government to implement market access
the regulation theory is clear the need to limit market access certainly does not constitute a
natural monopoly, only administrative monopoly so Said that the natural monopoly industry
needs market access regulation is not established.
(2) Anti-monopoly and anti-monopoly economies of scale cannot coexist and economies of

scale that can co-exist, because there are antitrust the main objection is monopolistic behavior,
rather than the monopoly structure never is the large-scale enterprises will be limited. For true
self Natural monopoly government intervention is the right to maintain the monopoly allowed
But in terms of pricing quality universal service such as effective regulation System.
3) Natural monopoly industry is mainly state-owned enterprises with Company Law adjustment
this is a relatively common misconception. Law is a private (commercial) areas basically
discomfort should be in state-owned enterprises. Task Force recommends that the abolition of
the existing company Provisions relating to state-owned companies of Law and the other
categories Against a natural monopoly industries in the state-owned enterprises to set up
special Corporation Law.

Conclusions and Recommendations

(1) clearly stated and strictly demonstration neither economies of scale Is a necessary condition
for a natural monopoly, nor a sufficient condition thus Proposed economies of scale, economies
of scope and a network economy three Body's "natural monopoly New Theory."
(2) that industrial decomposition discrimination competition and regulation Policy thinking
system and use that in the natural monopoly industries should charge Points to play the role of
competition while the real monopoly links targeted regulation. Broadly speaking than the natural
ridge off to regulate the industry a big step forward.
(3) There must be a natural monopoly industry market failure because the need for government
regulation is necessary but not successful regulation this and there will be regulatory failure.
Market failure and Regulation Case of failure coexist, foothold regulatory policy should be two
Evils choose the light or seek suboptimal regulation policy. Many love under the condition
according to this practical need "regulatory efficiency view" of a Regulation policy body
redesign.
(4) Regulatory policies must be fully taken into account by the regulator on Regulation of the
policy response or game behavior meet by the regulator the participation constraint and
incentive compatibility constraint, otherwise ineffective.
(5) Even the highly concentrated market structure not a Inevitable given serious monopolistic
behavior, the modern economy naturally Monopoly Regulation is not the focus of the market
structure, but corporate behavior Appropriate regulatory policy focus should be to make radical
changes.
(6) To develop a series of special corporate enterprises Law to regulate Fan natural monopoly
industry in state-owned enterprises rather than the current The Law. A typical form of stateowned enterprises is a special legal Business. The existing state-owned enterprise reform ideas
serious deviation Impossible to achieve better results.