Tag Archives: regulation

Pushing regulatory boundaries

Regulation is typically used where there is market failure, such as the natural monopolies in energy distribution, or asymmetric market power such as between banks and individual account holders. ┬áIn these instances, governments try to restore the market by restricting prices or actions. For example, in order to overcome monopolies in the postal sector, the regulator may set the price at a level that would be expected to be seen in perfect competition – price set according to a marginal cost (often calculated using a Long-Run Incremental Cost, or LRIC, model). Continue reading