DateDate: April 14, 2011: April 14, 2011

TopicTopic: Regulation and : Regulation and DeregulationDeregulation

AimAim: How does the government : How does the government protect and promote competition?protect and promote competition?

Do NowDo Now: : Read the articleRead the article..

PatentsPatents One way how the One way how the

government can give a government can give a company monopoly company monopoly power. power.

Gives a company the Gives a company the right to sell a new good right to sell a new good for a certain period of for a certain period of time. time.

WHY ARE GENERIC DRUGS ABLE TO BE SOLD?

Technology and ChangeTechnology and Change How did the movement from How did the movement from

regular phones to cell phones end regular phones to cell phones end a possible natural monopoly?a possible natural monopoly?

Cell phone companies do not Cell phone companies do not need to invest in miles of wires need to invest in miles of wires connecting homes. connecting homes.

Franchises and LicensesFranchises and LicensesFranchiseFranchise a contract issued by a local a contract issued by a local

authority that gives a single firm the right authority that gives a single firm the right to sell its goods within an exclusive to sell its goods within an exclusive market. market.

LicenseLicense grant firms the right to operate grant firms the right to operate a business. a business.

The Mets permit Shack Shack to operate in Citi Field

Z-100 needs a license to broadcast on 100.3 FM.

Exemptions From Anti-trust LawsExemptions From Anti-trust LawsThe US Government allows professional sports teams an exemption from these laws. You would have teams trying to form all over the place!

Price DiscriminationPrice Discrimination

What do you think this What do you think this means?means?

Can you provide any Can you provide any examples?examples?

Based on the idea that Based on the idea that everyone has their own max everyone has their own max price that they will pay for a price that they will pay for a good.good.

Ex: Senior Citizen day at Citi Ex: Senior Citizen day at Citi Field/Kids Eat Free.Field/Kids Eat Free.

DateDate: April 14, 2011: April 14, 2011

TopicTopic: Regulation and : Regulation and DeregulationDeregulation

AimAim: How does the government : How does the government protect and promote competition?protect and promote competition?

Do NowDo Now: Read the article.: Read the article.

Leading firms in the market form: a) a Leading firms in the market form: a) a cartel b) merge with one another, b) or set cartel b) merge with one another, b) or set the market price below their costs for the the market price below their costs for the short term to drive competitors out of short term to drive competitors out of business.business.

Government Regulates

Competition

Government has the power to regulate Government has the power to regulate practices if they give too much power to a practices if they give too much power to a company with few competitors.company with few competitors.

Examples: Microsofts Browser/NetscapeExamples: Microsofts Browser/Netscape

Government uses antitrust legislation to Government uses antitrust legislation to break up existing monopolies.break up existing monopolies.

Examples: Standard Oil Company and Examples: Standard Oil Company and AT&T. AT&T.

Government has the power to prevent the Government has the power to prevent the rise of monopoliesrise of monopolies

Blocks company mergers that might Blocks company mergers that might reduce competition and lead to higher reduce competition and lead to higher pricesprices

Some mergers leave consumers better offSome mergers leave consumers better off1) Lower overall average costs and lead to 1) Lower overall average costs and lead to

lower prices, 2) more reliable products or lower prices, 2) more reliable products or service, 3) more efficient industry. service, 3) more efficient industry.

Deregulation weakens Deregulation weakens government control, government control, antitrust laws strengthen it.antitrust laws strengthen it.

In some cases, the In some cases, the economic facts that created economic facts that created the need for regulation in the need for regulation in the first place have the first place have changed.changed.

How does the How does the government protect government protect

and promote and promote competition?competition?