An Introduction to regulation, it’s significance and rationale Kevin Hinde Introduction Regulations dominate all aspects of our private and organisational lives and we have to.
Download ReportTranscript An Introduction to regulation, it’s significance and rationale Kevin Hinde Introduction Regulations dominate all aspects of our private and organisational lives and we have to.
An Introduction to regulation, it’s significance and rationale Kevin Hinde Introduction Regulations dominate all aspects of our private and organisational lives and we have to work with regulatory environments and the policies that shape future rules, laws and regulatory institutions. The world is constantly changing and organisations need to understand regulatory frameworks in order to formulate and implement strategies. A Definition of Regulation “refers to the various instruments (both formal legal instruments and such informal tools as ‘guidance’) used by government to control some aspect of the behaviour of a private economic actor. Regulation can also include rules issued by non-governmental bodies (e.g. self-regulatory bodies) to which governments may have delegated regulatory powers. All regulations are supported by the explicit threat of punishment for noncompliance.” OECD, 2001. Types of regulations Economic (Structural) Regulation Social (Conduct) Regulation Administrative Regulation We concentrate on regulations relating to competition and protecting consumers. Why might we regulate? Planning Natural Monopoly Distributive and Social Justice Market Failure Types of Market Failure Public Goods. Externalities. Information Asymmetries. Market Dominance and the Abuse of a Dominant Position. Using Game Theory to explain regulation Company 1 Low Price Company 2 Low Price High Price High Price (2, 2) (4, 0) (0, 4) (3, 3) Alter the payoff to (1, 1) by imposing fines of £2m each on the cartel How much regulation? should occur as long as the marginal benefits equal the marginal costs of intervention, but the data problems involved are enormous. ‘Competition where possible, regulation where necessary’. A political Judgement? It should look to improve allocative, productive and dynamic economic efficiency. Does this always require the state? Property Rights and Public Choice views How about self-regulation? Competition Institutions European Institutions European Parliament and Council of Ministers European Commission DGIV Articles 81 and 82 Merger Regulation UK Institutions Office of Fair Trading Sector Regulators OFWAT, OFGEM, OFTEL, Competition Commission Fair Trading Act 1973 Competition Act 1998 Chapter I Prohibition Chapter II Prohibition Principles of good regulation Independence Accountability Transparency Clarity Speed Appeals Procedure Simplicity Periodic Review Consistency Commitment Fairness Targeted Some potential benefits of good regulation Overall Consumer Gains Manufacturing Telecommunications and Utilities Air Transport Universal Service Reflection Take some time to think through the issues. Do the required reading. Complete the activities associated with this lecture.