New Regulatory Agencies Begin Work Today
In A2 micro today we were discussing price-capping by industry regulators as a way of overcoming some of the welfare losses created by monopoly. The new much-expanded regime of regulatory agencies charged with monitoring prices and setting caps when appropriate is available here - can colleagues suggest some more? !!
read more...»Rated: 
(3/5), based on 4 reviews
OFWAT plans to turn the tap on water company prices
The Times today has an interesting article on the power battle between the water industry regulator OFWAT and the regional monopoly providers such as Thames Water. It appears that a much tougher pricing regime is planned for the utilities leading to cuts in the real price of water supplies for consumers.
“Every five years, Ofwat sets limits on prices that water companies in England and Wales can charge. For 2010-15, it has proposed that, before taking inflation into account, bills should be reduced for many customers, bringing the average annual water and sewerage bill down by 4 per cent from £344 to £330 by 2015. The water companies had wanted a £28 rise to fund their business plans.”
OFWAT wants the utilities to invest more in in improving drinking water quality, cutting leakage levels and raise the number of metered households from 36 per cent to 50 per cent (in a bid to control water usage). But will imposing real price cuts help achieve this objective? The aim is to have a pricing regime that forces the utilities to raise productivity and cut out as many inefficiencies as possible.
Water is a good example of where a strong regulator is needed because of the absence of competition - after all consumers can’t switch supplier if they are given a poor service.
Monopoly and Entry Barriers - Teacher Presentation
This updated presentation provides an overview of the role of barriers to entry in protecting the position of a monopolist.
Launch interactive version of presentation
Rated: (4/5), based on 1 review
Economics Snapshot - Google draws away from Microsoft and Yahoo
This BBC report discusses a deal announced between Microsoft and Yahoo.
“Microsoft’s Bing search engine will power the Yahoo website and Yahoo will in turn become the advertising sales team for Microsoft’s online offering”
This is an attempt to compete head on with the growing market dominance of Google in search engine queries but as the chart above shows there is a clear divergence between the market share of Google and the combined market share of Microsoft and Yahoo.
Microsoft and Yahoo’s combined share of U.S. search queries was 28% in June, down from 30% a year ago, according to comScore.
King of Shaves takes on Wilkinette
Will King, Founder and CEO of the fast-growing King of Shaves brand gave a superb presentation to the National Conference for Economics Teachers in London last week. The business was founded in 1993 and sixteen years later King of Shaves is making significant in-roads into the market for male and female shaving and grooming products. The battle against Wilkinette is well and truly joined but - as with most entrepreneurial success stories - the challenge of establishing a foothold in an oligopolistic market dominated by two corporate giants has not been smooth.
Rio Tinto and Nippon Steel agree big cut in iron ore prices
Annual contract prices thrashed out between the world’s biggest iron ore producers and the giant steel companies who are the biggest users of the commodity provide a window on a bi-lateral monopoly situation which pitches a monopoly supplier with a monopsonistic buyer. The balance of negotiating power in the market sends the contracted price higher or lower demanding on changing supply and demand conditions.
So the news that Rio Tinto’s subsidiary Hammersley Iron has agreed a 33 per cent cut in the annual contract price for iron ore with Japan’s Nippon Steel and with it brought an end to over five years of sustained increases in world iron ore prices is significant.
read more...»Revision: Market Structure, Conduct and Performance
A revision PowerPoint presentation on structure, conduct and performance in markets - designed for A2 micro
Presentation
Market_Structure_Revision.ppt
Wiki Revision: A to Z on Monopoly
Here is an idea that worked quite well today. Take a broad topic - in this case the economics of monopoly - and get students to enter items for an A to Z on that topic. The VLE worked well here and students could email in contributions or go direct into a wiki and edit the entries themselves. One of the benefits of Moodle is that it auto-links words from the internal glossary, so the A-Z is created instantly and automatically links back to the course glossary so that students can check their understanding of the concepts.
Here is our current A-Z, I am sure we have missed out lots of ideas, can you add some in? If so please leave a comment!
read more...»Revision: Profit
Profit and resource allocation
Profit measures the return to risk when committing scarce resources to a market or industry. Entrepreneurs take risks for which they require an adequate expected rate of return. The higher the market risk and the longer they expect to have to wait to earn a positive return, the greater will be the minimum required return that an entrepreneur is likely to demand.
read more...»SPEW
A hat tip to a fellow presenter on our revision workshops in London whose acronym to remember some of the effects of monopoly power in markets struck a chord with me
SPEW
Service - does the lack of competition affect the quality of service to consumers?
Prices - how high are prices compared to competitive / contestable market
Efficiency - productive, allocative and dynamic
Welfare - what are the overall welfare outcomes? Is there a net loss of welfare in markets dominated by businesses with monopoly power?
Are there anymore useful revision acronyms out there that you use? Please share them via the blog!
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