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Regulation and Deregualtion

Regulation and Deregualtion. Market Power. Monopolies and oligopolies control prices, and output. Will often drive other competitors out of the market through predatory pricing. Set prices below costs to have small companies fold. Practice also hurts the big company however.

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Regulation and Deregualtion

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  1. Regulation and Deregualtion

  2. Market Power • Monopolies and oligopolies control prices, and output. • Will often drive other competitors out of the market through predatory pricing. Set prices below costs to have small companies fold. • Practice also hurts the big company however

  3. Government watchdog • Federal Trade Commission and Department of Justice • Antitrust laws • Trust- business combination similar to cartel • Sherman Antitrust Act- outlaws mergers and monopolies that limit trade between states • Gave Congress the power to regulate business and industry

  4. Regulating Business • Microsoft 1997 • DOJ accused Microsoft of monopolistic behavior • Insisted computer manufacturers that sodl its operating systems must also include its browser. • Microsoft gave it browser away for free. • Predatory pricing- unfair advantage over Netscape

  5. Microsoft • Went to court • Claimed browser was part of operating system and could not be sold separately • Also claimed plenty of competition-lost • 2001President Bush settled case • Microsoft could link browser to operating system, but not force manufacturers to provide only Microsoft software

  6. Breaking up Monopolies • American Tobacco Company • Standard Oil • AT&T- 7 baby bells (Bell South, Pac Bell) • Government has power to block mergers that might create monopolies • XM Radio/Sirius • Sometimes- allowing mergers can also help consumers- $$$ and efficiency

  7. Deregulation • Government can also loosen it watch • Airlines, trucking, banking, railroad, natural gas, and television • Actually allowed for more competition between firms • Good and bad • Regulation protect but can be burdens on companies/barriers / passed to consumers

  8. Regulation vs Deregulation • Mixed results • 1990’s electricity and natural gas • \Some markets consumer prices fell- other markets they went up. • Airlines • 1978 President Carter deregulated • Bigger companies bullied out smaller • After 9/11 airline industry is still ?????

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