The Regulation And Deregulation In The Natural Monopoly Industry

The regulation and deregulation in the natural monopoly industry Natural monopoly industry is also called network utilities. A typicalexample is infrastructure industry, such as gas, power,telecommunications and so on. These utilities have low demandelasticity , and have no replaceable option. Because of the feature oftechnical economy, the monopoly industry can not offer products orservices completely by market. For the double purpose of protectingsocial welfare and encouraging industry, government have to replacemarket with administrative means-regulation.But regulation is perplexedby limited rationality and asymmetrical information. It has strongpractical significance that how to solve competitive problem andregulation in natural monopoly industry. Since 1970s', because the policy hasn't got good effect, the thoughtof national intervention economy get much query. From the microscopicindustrial policy to macroscopic Keynesia doctrine policy, westerndeveloped countries have relaxed control to economy. Governmentindustry control policy is especially loose, on the one hand the regulationsystem becomes incentive system, on the other hand it becomesderegulation. As a transitional economy country, our country hadn't a perfectnatural monopoly industry regulation system in the past. How to walk outof the administrative monopoly and how to establish a modern regulationsystem are a valuable question. It is not only a factor of natural monopolyindusty efficiency and the society welfare, but also an important key tomarket economic system. The researchful purpose of this article is to givean explanation of the process of natural monopoly industry regulationsystem, and to select our country how to found the regulation system ofnatural monopoly industry. The research way of this article is: the reason of regulation andderegulation and the choice of China. Changes of regulation theory havereflected the change of regulation practice, we may find regulationsystem change from traditional regulation to incentive regulation and thento deregulation by investigating theory changes. China is now in theinitial period of founding regulation system, and of breaking the oldadministrative system coexist with natural monopoly regulation system.The natural monopoly industry of our country is going forward toreform, however the step was very slow. At the same time we point outthat it is not necessary to establish a complete regulation system, whosemajor goal aims at controlling price and output , we should directly leadinto the direction of competition to regulation control reform. Chapter 2 have analysed the reason of the existing natural monopolyindustry. The analysis is elaborated from scale economy and scopeeconomic. Chapter 2 have a good introduction to two basic hypothesesabout natural monopoly industry. One is public benefit hypothesis, andthe other is capture regulation theory. Chapter 2 also elaboratesasymmetrical information theory, and points out the effect ofasymmetrical information to regulation effect.Finally this chapter alsointroduces the traditional method in the aspect of natural monopolyindustrial regulation, including marginal cost pricing ,Ramsey price andinvest return rate pricing as well as the defect of these price mechanism.Chapter 2 is the starting point of the analysis of full article, and it stressesmainly in analysis and the introduction of tool concept. Chapter 3 pays attention to defect of traditional price mechanismand gives some replaceable mechanism to solve defect of traditional pricemechanism. Those replaceable mechanism includes chartered rightbid , price control of upper limit and Yardstick Competition. Throughinvestigating the process of deregulation of western country, Chapter 3analyse the change of natural monopoly industry boundary. Chapter 4 gives more attention to the reality of Chinese naturalmonopoly industry. With the data of chinese power industry, this chaptermakes practical analysis: firstly, the writer gives some industry adescriptive statistical analysis; secondly, he makes...