Methods of regulation of activities of subjects of natural monopolies include. Goals and methods of regulation of natural monopolies - abstract
The legislation provides for two main methods for regulating the activities of subjects of natural monopolies:
- W price method, which is carried out by setting prices (tariffs) or their maximum level.
- Ø non-price method - through the definition of consumers subject to mandatory service; establishment of a minimum level of consumer provision in case of impossibility to fully meet the needs for goods produced (sold) by a subject of natural monopoly.
In addition, subjects of natural monopolies are not entitled to refuse to conclude an agreement with individual consumers for the production (sale) of goods if it is possible to produce (sale) such goods. The subject may be sent an order to conclude an agreement. In case of non-fulfillment of the order, it is possible to bring a claim to the arbitration court for compulsion to conclude an agreement.
The regulatory body for natural monopolies determines the method of regulation in relation to a particular entity and communicates through the media about the decisions taken, in particular regarding the introduction, change, termination of regulation of the activities of entities; on inclusion in the register of subjects of natural monopolies or on exclusion from it; on the applied methods of regulation in relation to a particular subject. In turn, the subjects of natural monopolies, executive authorities and local self-government are obliged to provide the necessary information to the regulatory bodies of natural monopolies.
There are several options state regulation prices and tariffs of natural monopolies. Let's take two options as an example.
- 1. In Russia and the United States, special authorities have been established to regulate electricity tariffs. The level of tariffs is set according to the principle: "costs plus profits".
- 2. Governments initiate competition for the market where competition within the market is either impossible or costly due to significant savings from scale. In this case, an auction is held and the right to serve the market is granted for a certain time to the enterprise that undertakes to contribute the largest amount to the budget revenue. The greater the number of competitors-firms for this right, the greater part of the profits can go to the budget.
Since natural monopolies have higher average costs than marginal costs, marginal cost pricing leads to unprofitability. This makes it necessary to abandon the principle of pricing at marginal cost, but on condition that the loss in efficiency caused by such a refusal is minimized.
The most common ways in the economy of state regulation of the activities of natural monopolies include:
- 1) setting by state antimonopoly bodies of prices and tariffs for goods and services of natural monopolies or price restrictions in the form of upper limit price levels;
- 2) obligatory servicing of a limited contingent of consumers at the established minimum level of their provision in case of impossibility to fully satisfy the consumer's requests for goods and services of natural monopolies;
- 3) differentiation of prices and tariffs for goods and services of natural monopolies depending on the category, social status of consumers, the provision of price incentives to certain categories at the expense of funds state budget or through cross-funding, where the "rich" pay for the "poor".
In those areas of production and economic activity where a monopoly is inevitable, the state resorts not only to supervision and regulation, but also to the direct management of natural monopolies, sometimes keeping them in state property by acquiring controlling stakes in monopoly companies.
A special part of natural or, more precisely, close to natural monopolies is formed by state monopolies operating in the field of economic policy formation, regulation monetary circulation, ensuring national (economic, military, social) security, production of goods and services for special purposes. As typical examples of state monopoly is the issue of money, regulation exchange rate, export and import of goods strictly controlled by the state, production and sale of alcoholic products, certain types weapons.
In relation to these types of monopolies, the state rarely pursues an antimonopoly policy or does not conduct it at all. State regulation is carried out on a legislative basis or by granting licenses (most often government organizations) for the implementation of state-monopoly activities.
Thus, state regulation of natural monopolies is one of the main factors ensuring the normal functioning of the economy. If the enterprise is not state-owned, then its regulation is as follows: either prices are set at the level of average monopoly costs, or two-component tariffs are applied that provide for a separate and fixed fee for access to services, as well as payment for each unit of paid services.
The regulation of monopoly activities is aimed at limiting monopoly manifestations and is carried out in order to reduce prices and increase output. It is carried out through legislative and economic measures. Taken together, they form a system of antimonopoly regulation.
The regulation of monopoly activities is aimed at limiting the market power of the latter and is carried out in order to increase the volume of supply and reduce the market price.
Legislative measures to regulate the activities of monopolies- these are legal norms aimed at preventing monopoly manifestations in the markets, as well as unfair competition. Most often, legislative measures involve:
Prohibition of agreements on prices and market sharing;
Establishing control over market division and mergers;
Regulation of sets provided by dominant
service providers to consumers.
The focus of these measures is related to:
a) with the correction of the behavior of monopolists to make it more competitive; b) the implementation of a structural policy, during which the industry itself becomes more competitive.
Economic measures to regulate the activity of monopolies is a set of economic instruments that limit the possibility of exercising the market power of sellers. The most important among these instruments are the direct and indirect regulation of prices and profits. Direct regulation of prices and profits usually implemented in the form of setting a "price ceiling", i.e. upper or lower price limit, and marginal rate of profit.
Target establishing a "price ceiling" - increase in output at a lower price. However, such a reaction of the firm to the introduction of a “price ceiling” will be observed only if the level of such a “ceiling” is acceptable to the firm, which is the main
problem when using this method of regulation. The ceiling should be such that, on the one hand, deprive the seller of monopoly profits, and, on the other hand, ensure that the company covers operating expenses and receives a fair return on invested capital. The most common use of a "price ceiling" is in a natural monopoly.
natural monopoly- a type of market structure in which a single firm provides market demand at the lowest production costs. It is inherent in industries that are characterized by steadily growing economies of scale (pipeline and rail transport, utilities, power supply systems and telecommunications). In these industries, the economies of scale are so great that satisfying the market demand by one firm will produce lower costs than if several firms compete. Therefore, the state can help support this kind of monopoly by creating a system of measures (controlling the price and quality of the good, determining the set of services provided) that counteract the exercise by the monopolist of the existing market power.
In the case of a natural monopoly (Figure 9.7), when due to a large proportion of fixed costs, economies of scale are so significant that the demand curve D crosses the average long run cost curve (LRAC em) in the area of its decline, the level LRAC em will always be lower
competitive LRAC K . Using its market power, a monopoly can set supply at the level Q M at a price P m and receive monopoly profit, which is the reason for regulating its activities. If the purpose of regulation is to optimize the volume of output, then in this case it is necessary to set the “optimal” price P MC from the point of view of society, equal to the marginal cost of production LRMC em, which would ensure an efficient allocation of resources. However, the optimal release Q MC ,. does not ensure production efficiency, since the level of average long-term costs of the company exceeds set price, which will lead to losses in the short run and the exit of the firm from the industry in the long run. In order for the firm to remain in the industry, society must either compensate for losses by subsidizing production, or establish a "fair price" Pem corresponding to the average long-term production costs. LRACeM. In this case, the monopoly, receiving a normal profit, will remain in the industry, and society, depriving the company of monopoly profit, although it does not achieve the maximum possible output, will ensure its increase to Q EM at lower prices than under perfect competition Р k REM.
In real economic practice, the application of price regulation for products of natural monopolies faces a number of problems. Considerable difficulty is the very definition of the level of average costs in terms of the validity of the inclusion of certain types of costs in the costs. Another problem is that price controls can increase X-inefficiencies because subsidized firms, knowing that their costs will be reimbursed, lose incentive to cut costs. When establishing "fair prices", carried out most often on the basis of the
costs plus, firms have a direct interest in increasing costs, as this leads to an increase in total profit. If, however, its capital assets are taken as the basis for establishing a “fair price”, then the firm will strive for unjustified substitution of labor for capital, which will lead to the same X-inefficiency, only in the form of an inefficient allocation of resources within the firm. It is important to remember that the establishment of "price ceilings" is fraught with the emergence of a shortage of products.
Indirect regulation of prices and profits carried out by taxing either products or profits. In the first case, the introduction of the tax will cause an increase in costs and the monopolist will reduce output and raise the price. Therefore, when introducing a tax on products, it is extremely important to take into account the degree of elasticity of demand. If its elasticity is high, then the price increase will be less than the size of the tax, which will lead to the redistribution of part of the monopoly profit in favor of consumers. Accordingly, with low elasticity of demand, the introduction of a tax on products will only result in additional losses in total welfare.
The goal of indirect profit regulation is to take away monopoly profit from the firm, leaving it with only normal profit. Taxation of profits is introduced only in the case of a steady receipt by the company of profits that exceed the average level. The taxation of monopoly profits differs from price regulation in that the tax does not affect the price level and output, and the entire burden of taxation falls on the producer. At the same time, tax revenues are appropriated by all consumers, and not only by consumers of the monopolist's products. The method of taxation of monopoly profits is not identical to the sales tax, in which the tax burden is shared between the producer and the consumer. In the practical implementation of measures to establish a marginal level of profit, the same difficulties arise as in the establishment of a "price ceiling". .
SUMMARY
1. Monopoly occurs when one firm provides the entire volume of industry supply in the absence of close substitutes for the product, and manifests itself in the ability of the seller to influence the market price. . 2. The existence of monopolies is due to the presence of barriers to entry into the industry, the role of which can be played by a significant positive effect of scale, except
vested rights, control over the most important factors production, which are sources of monopoly power.
3. Depending on the reasons for the formation of monopoly power
sti distinguish between: a closed monopoly, the position of which
protected by law or exclusive rights,
protecting it from competition; open monopoly,
for which the possession of monopoly power is re
the result of her own achievements and always has time
changing character; natural monopoly when the effect
tive is the size of the enterprise, providing the entire
volume of market demand; monopsony when monopoly
power is concentrated in the buyer.
4. Providing the entire industry supply, the monopolist has
there is no possibility to influence the market price of
by regulating the volume of its output.
5. Since there are no market forces in a monopoly,
forcing to produce with minimum average of
holdings, the monopolist can choose any amount of output
ka. However, following the profit maximization rule, he
takes the amount of output at which the marginal
pen is equal to the marginal cost of production. Wherein,
faced with a sloping demand curve, the monopolist
price is higher than the marginal cost of production
properties by a value inversely proportional to the elasticity
demand.
6. Since the decision of the monopolist on the volume of supply for
depends on changes in the elasticity of demand, which determines
the position of the marginal revenue curve, then a single-valued
there is no relationship between price and quantity supplied
exists. Therefore, for a monopoly market, the supply curve
ing, reflecting the relationship between price and volume
offer does not exist.
7. Since the marginal revenue curve of the monopolist is
lies below the market price curve, then the maximizing
the profit of the monopolist, the quantity supplied will be less
competitive, and the monopoly price per unit of output
will be higher than the competition. Implementing the offer
in a volume less than optimal and selling products at
prices above the marginal cost of production, monopoly
leads to a reduction in social welfare.
8. The inefficiency in the distribution (market prices above the marginal costs of production) and the use (average production costs above the minimum) of resources that arise under monopoly conditions makes it necessary to regulate the activities of monopolies in order to reduce prices and increase output. Such regulation is implemented through the application of legal norms aimed at preventing monopoly manifestations, and economic measures that limit the possibility of exercising the market power of a monopoly.
Key Concepts
Monopsony
open monopoly
Losses of "dead weight"
Offer in terms
monopolies
Demand for the monopolist's product
Economic controls
To regulate natural monopolies, various instruments can be used, which can be conditionally divided into three groups.
- 1. Direct setting of prices for products of natural monopolists. Fixing prices and tariffs for the services of natural monopolies in practice can be based on many considerations, such as, for example, concern for certain categories consumers and the associated cross-subsidization, the significance of the service for the industries consuming it, etc. It is this kind of regulation that currently prevails.
- 2. Indirect regulation of prices through the establishment of marginal values of profit or profitability.
- 3. The use of competitive mechanisms for the transfer of rights to produce products (render services) in a natural monopoly. Usually, we are talking about the competitive sale of licenses that give the company the right to become a natural monopoly in a certain area. The most striking example is the transfer of individual railways in concession in Argentina, Brazil and some other developing countries in order to improve the efficiency of their functioning.
Consider Fig. 2.1. Natural monopoly, using its market power, can independently establish a profitable offer for itself at a certain price and receive monopoly profit, which is one of the reasons for regulating its activities.
Rice. 2.1
However, the optimal output Q 1 for society does not ensure production efficiency, since the level of average long-term costs of the firm exceeds the set price, which will lead to losses in the short run (in the amount of the area PP 1 CE 1) and the firm's exit from the industry in the long run. In order for the firm to remain in the industry, society must either compensate for losses by subsidizing production, or establish a "fair price" P, corresponding to the average long-run cost of production LAC. In this case, the monopoly, receiving a normal profit, will remain in the industry, and society, depriving the firm of monopoly profit, although it does not achieve the maximum possible output, will ensure its increase to Q at a lower price P than under perfect competition.
In real economic practice, the application of price regulation for products of natural monopolies faces a number of problems. Considerable difficulty is the very definition of the level of average costs in terms of the validity of the inclusion of certain types of costs in the costs. Another problem is that price controls can increase X-inefficiencies, as subsidized firms, knowing that their costs will be reimbursed, lose incentives to cut costs. When establishing "fair prices", most often carried out on the basis of the "cost plus" principle, firms are directly interested in increasing costs, as this leads to an increase in total profit. If, however, its capital assets are taken as the basis for establishing a “fair price”, then the company will strive for unreasonable substitution of labor by capital, which will lead to the same X-inefficiency, only in the form of an inefficient allocation of resources within the company. One should not lose sight of the fact that the establishment of "price ceilings" is fraught with the emergence of a shortage of products.
Indirect regulation of prices and profits is carried out by taxing either products or profits. In the first case, the problem is that the imposition of the tax will increase costs and the monopolist will reduce output and raise the price. Therefore, when introducing a tax on products, it is extremely important to take into account the degree of elasticity of demand. If its elasticity is high, then the price increase will be less than the size of the tax, which will lead to the redistribution of part of the monopoly profit in favor of consumers. Accordingly, with demand having low elasticity, the introduction of a tax on products will only lead to additional losses in total welfare.
The goal of indirect profit regulation is to remove monopoly profit from the firm (Figure 2.2), leaving it with only normal profit. Taxation of profits is introduced only in the case of a stable receipt by the company of profits exceeding the average in its level. The taxation of monopoly profits differs from price regulation in that the tax does not affect the price level and output, and the entire burden of taxation falls on the producer. At the same time, tax revenues are appropriated by all consumers, and not only by consumers of the monopolist's products. The method of taxation of monopoly profits is not identical to the sales tax (increases MC and AC), in which the tax burden is distributed between the producer and the consumer. In the practical implementation of measures to establish a marginal level of profit, the same difficulties arise as in the establishment of a "price ceiling".
Rice. 2.2
In countries with developed market economies, the modern concept of regulation of natural monopolies suggests that the use of state regulation is considered justified in cases where a certain product (service) is produced by a single economic entity, provided that competition between similar enterprises is impossible due to technological and or economic reasons, and the growth of the production volume of a single entity is accompanied by a decrease in unit costs (economy of scale).
In the economy of the USSR, all prices were set in a planned manner, and resources were distributed centrally, so there was practically no special allocation of industries related to natural monopolies. The transition to a market economy necessitated the use of certain methods of regulation of natural monopolies. This need is due to a number of reasons.
Despite the technical efficiency of the concentration of production in the hands of one enterprise, market practice reveals many facts of abuse of a monopoly position in the form of overstating costs or inflating profits, which negates the social effect of economies of scale due to the dictate of unjustifiably high prices. At the same time, such abuses are often extremely difficult to recognize from the outside due to the fact that the real state of affairs of the monopolist is, as a rule, carefully concealed information.
In view of the fact that natural monopolies, as a rule, produce products necessary for the normal functioning of most enterprises and make up a significant part of the resources they consume, non-payments for the products of natural monopolies result in a non-payment crisis on the scale of the state economy. The spread of non-payments is the result of price discrimination by natural monopolies and other economic structures that have influence on the market and are not constrained in their activities by the regulatory influence of the state.
The need to regulate prices in natural monopolies is due not only to the negative consequences of monopoly behavior. Reasonable differentiation of prices for the products of natural monopolies can serve as a powerful tool for the state's economic policy, which makes it possible to regulate the economic activity of various industries and smooth out its seasonal fluctuations. In other words, the mechanism of influencing the economy through the system of regulated prices is an effective addition to the fiscal macroeconomic policy.
The tasks of state regulation of prices in natural monopolies can be reduced to the following:
ensuring a balance of consumer interests ( affordable prices) and regulated enterprises ( financial results attractive to lenders and investors);
determination of the tariff structure based on the principles of fair and efficient allocation of costs to tariffs for various types consumers;
stimulating enterprises of natural monopoly industries to reduce costs and excessive employment, improve the quality of service, increase the efficiency of investments, etc.;
using the possibilities of price regulation mechanisms in the implementation of a stabilizing macroeconomic policy;
management of economic development in the regions.
Before talking about the development of state regulation mechanisms, it should be noted that only a part of the types economic activity carried out in industries such as the gas industry, electricity, rail transport and communications, in fact, refers to a natural monopoly. Other types of economic activity can potentially function effectively in a competitive environment, but the creation of a competitive environment implies the need for adequate structural changes.
For example, production, both in the electric power industry and in the gas industry, in contrast to the transportation and distribution of resources, is objectively not a natural monopoly. Communication industries such as long-distance and international telephone communications also should not be considered as natural monopolies, but so far in many cases, local telephone networks, at their current technological level in the Republic of Belarus, should be classified as natural monopolies and subject to regulation. In rail transport, competition with other modes of transport either already exists, or its emergence is possible if a number of conditions are met. Theoretically, it is possible to consider options for the emergence of internal competition between individual railway transport enterprises.
Ideally, objectively conditioned structural changes in these industries, allowing maximum use of the competitive forces of the market, will lead to a limitation of the scope of state regulation. However, a properly implemented restructuring will not only not limit the scope of regulation, but will also increase its effectiveness through a clear separation of regulated and unregulated types of economic activity.
If such activities are not separated and are carried out within the same enterprise, the task of setting the permitted price level facing the regulators becomes more difficult due to the impossibility of accurately calculating the costs that should be attributed to regulated activities.
So, in the branches of natural monopolies, it is necessary to carry out a number of transformations that will contribute to solving the problems described above:
regulated and unregulated activities should be separated from each other as far as possible in the existing economic, social and political conditions. The separation of accounts and balance sheets is minimum requirement, but the best solution may be the creation of independent enterprises for each type of activity, which would operate on the basis of an open contract system.
regulated activities should be characterized by openness and accessibility of information for regulatory authorities, which will allow setting prices (tariffs) at a level high enough to ensure normal profitability and, accordingly, attract new investments;
potentially competitive segments of industries should be identified and reorganized in order to form a real competitive environment. At the same time, it should be noted the inexpediency and practical impracticability of restructuring existing monopoly structures at this stage of social development. economic relations in the Republic of Belarus. However, conditions must already be created for the emergence and development of independent private and state companies that would compete with monopoly enterprises;
the mechanism of corporate and joint-stock management of companies operating in the system of natural monopolies should be reconstructed. Currently, the government of the Republic of Belarus owns controlling stakes, but often its role as an owner is nominal, and the administration manages enterprises without taking into account the interests of the owner. In market economies, shareholders or their representatives, the board of directors have a decisive influence on the development of an enterprise development strategy.
Effective corporate and shareholder management assumes that the owners of enterprises have a great interest in orienting the company's management towards maximizing profitability and equity capital while existing conditions regulation. Of course, privatization has a certain impact on corporate governance. However, both after full privatization and before it, corporate governance can become more efficient only if strategic investors are attracted through the sale or transfer of large blocks of shares to those individuals or organizations that will be interested in tight control over the work of managers.
Practice shows that the mechanical transfer of economic forms, including regulation, from one socio-economic environment to another often does not give the desired result. This is understandable, because they arise in different and unique conditions. The key to successful borrowing of someone else's experience is its critical rethinking, which is expressed, in particular, in adaptation to specific conditions. new environment and objectives of economic policy.
In developed countries with market economy legal systems of regulation of natural monopolies have been improved over the years, so they, of course, have gone far ahead in comparison with the legislation of the Republic of Belarus. There are two main forms of state regulation of natural monopolies while maintaining the predominance of private capital in them:
organization of competitions for entering the monopoly market,
price regulation of activities directly in the market.
Competition in the monopoly market is organized in the form of a competition (auction). Its winner acquires the exclusive right to produce on a national scale or in the local market. The competition for entry into the natural monopoly industry was first theoretically analyzed by the English economist E. Chadwick.
In addition, effective competition for entry to the market can not be organized in every monopoly market. In particular, it is limited by the high size and irrecoverable nature of the costs of participation in the competition, which, therefore, should be fully or partially compensated by the state.
Competition for the market of natural monopoly industries exists in 37 countries. In France, this practice has more than a century of history. Back in 1882, a contract was signed with the Perrier brothers, who undertook to supply water to Paris for 15 years. Now about 70% of the population is supplied with water by private companies.
The winner of the competition gets the opportunity to operate on a leasehold or concession basis. More common are leases, in which the assets (network, etc.) are either owned by the state (central or local authorities) or created at its expense, but maintained and managed by a private company. Under a concession, a private firm invests in the development and maintenance of the network from its own or borrowed funds. Contracts are concluded for various terms, which, as a rule, are longer, the more funds the company invests in production. Usually the duration of the concession is sufficient for a full return on investment, after which the system can be bought out by the state (municipality). Concessions are typical for the organization of water supply, rail transportation, and telephone communications.
Repeated competitions usually do not lead to replacement of tenants. For example, in France, water supply contracts are constantly renewed with the same operators.
In the United States, until recently, the dominant practice of regulating natural monopoly was the limitation of the rate of profit, carried out on the basis of a premium on costs. Companies were allowed to receive net after-tax income within certain limits.
Under such a system, all aspects of the company's activities - tariffs, investments, profitability - are subject to detailed legal regulation from the side government agencies(in the United States - the relevant Federal Commission, state and municipal authorities). In addition, public hearings of the Public Utilities Boards - UPCs are held here everywhere.
The tariff structure is designed to avoid unfair and unfair discrimination. From here, the tariff must be set for each type of sale or nature of the service, which usually requires a breakdown into them of more costs based on some principle, for example, production and sales volumes, direct costs, profits.
The approved tariff is usually valid until the company requests a revision, which usually happens if the rate of return becomes insufficient. Moreover, enterprises must obtain permission not only to increase tariffs, but also to change their structure, and in some cases even to reduce them.
The procedure for determining the tariff consists of three stages: identifying current costs, determining investments and setting the rate of return on investment.
The definition of current costs is not limited to a purely technical operation. Most state commissions have developed a uniform accounting system that is mandatory for all companies. The commissions make sure that companies do not have unnecessary costs due to purchases at inflated prices, setting high wages or not looking for suppliers of cheaper goods and services.
State University - Higher School of Economics
Institute for Professional Retraining of Specialists
Department of Economic Theory
ESSAY
On the topic of: Goals and methods of regulation of natural monopolies
Student: Seliverstova Lyudmila Sergeevna
Group No. 18EUP-1
Moscow, 2009
Introduction 3
1. Existing methods regulation in natural monopoly; 4
2. Goals of natural monopoly regulation; 5
3. Methods of state regulation of activities are natural monopolies 6
3.1 Identification of market boundaries as a methodology for state regulation of natural monopolies; 9
3.2 Methodology for identifying market boundaries. 9
Conclusion; 12
Bibliography. thirteen
Introduction
The problem of monopoly in the economy has been of interest to economists for almost the entire twentieth century. This topic has been and will remain relevant as long as there are world economic giants that firmly occupy a monopolistic place in production.
Reducing the level of monopolization of the economy, the formation and maintenance of a competitive environment, the high-quality implementation of antimonopoly policy remain the key tasks of economic policy in the present stage. Of particular relevance is the problem of ensuring an acceptable combination of competition and monopoly for society, which determines the conditions and efficiency of management, the motivation of economic entities, the formation and distribution of income, and, ultimately, the pace and level of socio-economic development.
In the conditions of modern Russia, the development and support of competition have become one of the key areas of economic policy. However, there are sectors in the economy where competition is impossible or inefficient for objective reasons (spheres of natural monopoly). Meanwhile, the lack of effective competitive mechanisms and the threat of abuse of economic power by subjects of such monopolies forces the state to create a special system of regulation in the field of natural monopolies, aimed at achieving a balance of interests of consumers and subjects of natural monopolies, ensuring the availability of the goods they sell to consumers and the effective functioning of subjects of natural monopolies.
The work was written on the basis scientific works and articles in the field of economic theory.
Purpose: To consider the existing methods of regulation in a natural monopoly.
The subject of the study is the goals and methods of regulation of natural monopolies on the example of Russia, the USA, Great Britain and other countries.
The abstract covers:
application federal law"On natural monopolies", outlines some methods of state regulation of the activities of natural monopolies;
· methods of identification and allocation of market boundaries, as well as the goals of state regulation of natural monopolies.
1. Existing methods of regulation in a natural monopoly
In an economic system, there are cases where monopoly becomes more efficient than competition. Such a case is called a natural monopoly, i.e. when one firm can produce enough goods to supply the entire market at a lower cost than two or more firms could. This concept contains a contradiction, the resolution of which is the task of the state socio-economic policy. Indeed, on the one hand, the existence of such goods is recognized, the production of which is most efficient in a monopoly market, and, on the other hand, in the absence of competition, a single producer can abuse his position in the market in order to maximize his profits. Moreover, as shown in theory, the selling price of products chosen by the monopoly to maximize its profits is always higher than the competitive price, and society as a whole incurs losses. In this situation, the state should regulate the activities of a natural monopoly in such a way that, while not allowing the monopolist to dictate its terms to consumers, it should at the same time give it the opportunity to successfully function and develop.
In a broad sense, regulation can be defined as the intervention of state bodies in the work of market mechanisms in order to correct the behavior of market agents, and hence the results of the market.
Ideally, the state regulates only in cases where the functioning of the market as such gives unsatisfactory results. It is assumed that the benefits of government intervention outweigh all the costs associated with it, that is, the ratio of benefits / costs of regulation exceeds unity where:
· Competitive resolution of the issue is impossible - this is a situation of natural monopoly;
· Competition exists, gives relatively effective results, but due to certain problems with market participants and activities, effective results may be undesirable (subject to state regulation);
For example, competition may “decide” that providing transport services to remote, sparsely populated areas is unprofitable and cancel these routes. Efficiency will be achieved, but equality and justice will be violated. And efficiency is not the only goal. Economists are sometimes shy about the goal of "fairness" and "equality", believing that if transfers are to be made, they can be done through tax leverage or lump-sum payments. But since such events themselves require certain costs, the solution cannot be so simple and unambiguous. Transaction costs play a significant role.
· A competitive solution is possible, but inefficient due to externalities or information asymmetries (subject to state regulation).
One of the developed forms of regulation is regulation that corrects external effects (externalities) that are the cause of the breakdown of the normal “competition-efficiency” relationship. Many industrial activities generate externalities that are negative for the wider community. For example, fossil fuel power plants emit harmful emissions into the atmosphere, after which oxide rains are shed. It turns out that the marginal social costs of such production exceed the marginal costs of a particular firm. In many cases, the producers of harmful externalities themselves are ready to adjust their activities in order to minimize externalities. Such conscientiousness of the company is not often shown.
The state does not seek to make all markets perfectly competitive, but seeks to eliminate the serious shortcomings of the market. It creates an environment where competition is encouraged rather than monopoly, where the first option of behavior is more profitable than the second. Thus, the antimonopoly policy is an instrument of administrative regulation of the economy, in order to prevent violations of the economic balance or socially undesirable changes, its main points are:
· Protection and encouragement of competition;
· Control over firms that occupy a dominant position in the market;
· Price control;
· Protecting the interests and promoting the development of small and medium-sized businesses.
Regulation can take various forms. The key difference is between direct and indirect regulation. Direct regulation includes any measure or action directly directed at a market agent (or group of agents), while indirect regulation covers everything that affects the economic and market conditions common to all real and potential participants.
2. Goals of natural monopoly regulation
The primary goal of regulation is to eliminate inefficiencies without creating new distortions. Regulation exists to help achieve goals public policy, among which in the natural monopoly industries under consideration, the following are of paramount importance:
· Economic efficiency;
· Reliability of supplies;
· Social goals (social justice, equality);
· Objectives of environmental protection.
The goal of regulation by the authorities is to achieve the desired results for consumers when competition cannot be relied upon. If the regulator had enough information about the regulated firm, then the disputes about the methods of setting prices for the products of a natural monopoly would disappear by themselves (it would be easy to force a monopoly company to produce the desired amount of products at optimal prices, using the best combination of factors production). But since it is often impossible to establish a firm's marginal cost function due to opposition from the regulated, the task of officials becomes to induce it to release publicly. required volume products, without denying the opportunity to obtain the much-desired profit. And it's not easy at all. The theory of regulation aims to create such a mechanism for influencing a natural monopoly, which would allow achieving optimality. But to do this, you first need to find the best combination of price and output, and then propose a plan of action that will allow you to achieve this combination. The purpose of state-legal regulation is to maintain or establish a balance between the interests of consumers and the interests of subjects of natural monopolies, to streamline their activities by introducing rules of conduct.
3. Methods of state regulation of the activities of natural monopolies
The problem of the need to regulate natural monopolies was recognized by the state only by 1994, when the rise in prices for their products had already had a significant impact on undermining the economy. Therefore, in Russian Federation On August 17, 1995, the Federal Law “On Natural Monopolies” was adopted, which determined the industries related to natural monopolies and the scope of their regulation. At present, three major natural monopolies have formed in Russia: RAO Gazprom, OAO Russian Railways, and OAO RAO UES of Russia. According to the Law "On Natural Monopolies", the scope of regulation includes transportation of oil and oil products through main pipelines, transportation of gas through pipelines, services for the transmission of electrical and thermal energy, rail transportation, services of transport terminals, ports and airports, services of public and postal
connections. An analysis of the results of the application of the Federal Law “On Natural Monopolies” makes it possible to single out some methods of state regulation of the activities of natural monopolies.
The three most common methods of regulation in a natural monopoly are:
· Direct state regulation (opportunities and boundaries);
· Bidding for a franchise (possibility of use and efficiency in various conditions);
· Price discrimination (organizational and economic aspects).
Consider direct state regulation: Most often, the mechanism and boundaries of such regulation are determined by national legislative acts. Direct government regulation by setting tariffs or decisively influencing them for natural monopolists is a fairly simple and understandable way to reduce the role of negative factors that exist in their activities. In Russian legislation, this method is given paramount attention. However, there are several problems with this approach:
· the need to create a body of state control over the activities of a natural monopolist or to give such functions to an already existing antimonopoly structure. This carries the threat of substituting the public interest for the interests of the ruling groups, not to mention the corresponding costs for the maintenance of state officials;
complexity exact definition real costs natural monopoly service provider.
Talking about bidding for a franchise, we will deal with contract system as a form of economic organization. The contract is concluded with the manufacturer (economic entity) that offers Better conditions(lower price, greater range of services, etc.). Should we expect that the contract system will solve the problem of natural monopoly once and for all? Of course not.
In the first case, the prerequisites are created for the emergence of a private unregulated monopoly with the establishment of a high monopoly price that society as a whole has to pay (we are dealing with direct public harm to the monopoly. In the second case, all the shortcomings of the administrative, and not economic system where the processes of politicization of the solution of the problems of natural monopolies take place (in the interests of the state and the ruling elites, but not in the interests of society as a whole).
The phenomenon of natural monopoly is no exception, so bidding for a franchise in the regulation of natural monopolies is one of the equally likely options. On the whole, the authors agree with O. Williamson's conclusions based on the study of the American experience of using bidding for a franchise (for Russia, this is most likely “exotic”). Bidding for a franchise allowed the United States to solve problems with some natural monopolies, and the best way compared to other methods of regulation. This applies to the deregulation of trucking, to the organization of the work of local airlines, the postal service, to the work of cable television networks, in some cases - to the work of public utilities, to the problem of deregulation of railways.
Speaking of natural monopolies, one cannot ignore one more way to regulate them - price discrimination .
Natural monopolies quite often resort to the practice of price discrimination to maximize their net income. To do this, they segment the market. An example of such an approach would be the practice of establishing
higher tariffs for electricity, gas, communication services, public Utilities for enterprises and organizations and, accordingly, reduced tariffs for citizens.
It is also possible to use multiple tariffs depending on the time of provision of services (communications, electricity, railway and air tickets, etc.). However, the same mechanism can be used not only by a natural monopolist, but also by the state, which seeks to alleviate the burden associated with a monopoly. It can set decreasing tariffs for social
ally unprotected groups of the population (pensioners, disabled people, etc.). For example, the practice of preferential tariffs for various types of services provided by natural monopolies is widely used. The source of coverage for these benefits is important here. However, very often in Russia it is either not determined, or without appropriate calculations, unreasonably, it is shifted to the manufacturer. The most common example is utility bills. To date, the number of “beneficiaries” is already comparable to the number of people, benefits are not
having. This contributes neither to the stabilization of the social situation, nor to the normal reproduction of the capital of a natural monopoly enterprise.
The practice of using price discrimination can be applied by the state not only in the case of direct state regulation of a natural monopoly, but also in the case of bidding for a franchise. Thus, price discrimination becomes a "double-edged weapon" that can be successfully used by both the natural monopoly and the state to achieve their goals. As a result, a certain “balance of interests” arises, and the severity of the problem
on the part of the natural monopoly is softened (smoothed out, removed).
Really state control over natural monopolies consists both in state ownership of a controlling stake and in the existence of special antimonopoly legislation regulating the methods of tariff regulation and control over the activities of natural monopoly entities, as well as determining the list of consumers subject to preferential or mandatory service. Russian legislation aimed at the regulation of natural monopolies, provides not only state tariff regulation, but also the restriction of their disposal of property (primarily that they inherited as a result of privatization). At the same time, if the enterprise is not state-owned, then its regulation boils down to the following: either prices are set at the level of average monopoly costs, or two-component tariffs are applied that provide for a separate and fixed fee for access to services, as well as payment for each unit of paid services.
3.1 Identification of market boundaries as a methodology for state regulation of natural monopolies
Let's try to formulate the main methodological principles of state regulation of natural monopolies.
As a result of the allocation of market boundaries, the following definition can be given.
Natural monopoly as an object of state regulation is a sphere of economic activity where competition or economically inefficient, or impossible due to the specifics of the technological process of production of goods (services), or contrary to the interests of society (the state).
Such a definition clearly reflects the objectivity of state regulation of a natural monopoly.
At the same time, how to distinguish a natural monopoly from a monopoly in general?
chief sign the indivisibility of infrastructure is a natural monopoly, its other features follow from it:
subadditivity of costs;
Homogeneity and irreplaceability of products;
· endogeneity of the structure of industry companies as vertically integrated;
social (public) significance.
Natural monopoly as an object of state regulation is divided into a natural monopoly core, identified on the basis of the economic and technological boundaries of the market, and an adjacent natural monopoly segment, allocated based on the social and strategic boundaries of the market chosen by society. It is fundamentally important that a natural monopoly also includes areas that are potentially competitive, but limited by society.
3.2 Methodology for identifying market boundaries
The above analysis of the Russian legislative framework illustrates the imperfection of the definition of natural monopolies, which leads to the inefficiency of the choice of instruments of state regulation. In our opinion, the methodology for identifying natural monopolies should be based on the identification of such sectors within a multi-product industry where competition is impossible and/or inefficient. Let's call it market boundaries, among which we highlight:
- economic;
- technological;
- social (public);
- strategic.
Economic the theory assumes that an industry is a natural monopoly if, at all levels of output, the cost function C(q) is subadditive, i.e. inequality holds. This means that if n firms in total produce output q, then their total cost of producing all output will always be higher than the cost of a single firm producing all output q.
In a strictly theoretical approach, the economic boundaries of the market delineate only the infrastructure segment, which became the basis for a liberal approach to natural monopolies and their reform. Purely economic approach without taking into account the specifics of the industry, in our opinion, does not fully reflect the essence of natural monopoly and its role in the development of society. Such total liberalization is as extreme as a planned economy. The purely economic principle of identifying the natural monopoly sector is the main shortcoming of the modern theoretical paradigm in the study and regulation of natural monopolies.
Technological boundaries determined by the impossibility of the existence of competition due to the technical and production features of the industry . In each infrastructure industry, the technological boundaries of the market are distinguished differently due to the technological features of the industries. But it is precisely the identification of the technological boundaries of the market that makes it possible to say whether direct state regulation should be limited to the infrastructure segment, as a natural monopoly core, or whether the boundaries of the free market should be narrowed.
Social (public) boundaries it is necessary to allocate on the basis of the principle of public utility (significance). Products of the natural monopoly sector are present in the cost of almost all goods and services. Low prices for products of infrastructure industries are one of the most significant competitive advantages Russian economy. Moreover, goods (services) of natural monopolies are directly consumed by the population. This determines the special role of the natural monopoly segment for the state and the life of society. Recognition of the social (public) function of natural monopolies will make it possible to identify those areas in which, due to social significance, competition may be impossible and even dangerous, and prices must be regulated, and in some cases subsidized by the state. This mainly applies to areas serving the population. For example, in no country in the world, except for Japan, did rail passenger transportation become profitable, and all the developed countries subsidize them. The project of regional gasification is also impossible without the participation of the state, or without the existence of a monopoly by OAO Gazprom, since in a competitive environment it is unlikely that any of the companies will take on these functions. In the power industry, competition in the retail market can be dangerous in general. Supply stability is a question national security. And any "imperfection" of the market in the electric power industry due to the impossibility of storing electricity can be much more serious in terms of consequences for society than in any other.
Strategic boundaries are close to social and also outline areas where competition should be limited due to strategic (political or geopolitical) reasons. This delineation is by no means the creation of a monopoly market in traditionally competitive industries, as representatives of ultra-liberal ideas are trying to prove. For industries of the natural monopoly sector, the vertically integrated organization of economic relations in the industry is more “natural”. The principle of endogeneity of the structure of natural monopoly industries is expressed in the fact that the division of a natural monopoly industry into competitive and natural monopoly activities is an artificial process, as a result of which a vertically integrated company is formed again.
So, for example, after the reforms of the electric power industry carried out in the UK (one of the most liberal reforms of the electric power industry was carried out in the UK), it was necessary to “return to the starting point” - generating companies were allowed to participate in the privatization of distribution companies. As a result, vertically integrated companies have emerged that not only produce electricity, but also distribute it. Creation of vertically integrated companies, incl. merger with fuel companies, is a key trend in all liberalized energy markets. It follows that the hasty and artificial unbundling of energy companies, not driven by the market, ultimately leads only to “reverse” consolidation.
Given the above, we can conclude that the division of the natural monopoly industry by separating the actual monopoly core is premature. Practice shows that in many cases, after the actual division of the natural monopoly into areas of activity, the reverse process was outlined in the future.
CONCLUSION
Without a doubt, it is the efficiency of the functioning of natural monopolies that can determine the competitiveness of the Russian economy in the international markets, not to mention the infrastructural support of the entire life of the country. And it is precisely the discrepancy between the structures of natural monopolies and the system of their state regulation of the achieved degree of development market relations, as well as the conditions of integration into the world economic space, necessitated their reform.
Antimonopoly legislation should be reasonable and thoughtful, and its application by employees of regulatory agencies should be a regulatory mechanism for the market, but nothing more, since excessively rigid antitrust policy can lead to a large imbalance in established market relations and cause dissatisfaction among employees of large firms.
LITERATURE
1. Federal Law of the Russian Federation "On Natural Monopolies" dated August 17, 1995 No. 147-FZ;
2. Akulov V.B., Rudakov M.N. "Organization Theory" tutorial. Petrozavodsk: PetrGU, 2002;
3. Korolkova E.I. HSE Economic Journal No. 2 2000 Lecture and teaching materials "Natural monopoly: regulation and competition" p. 235-236, 242-243;
4. Ivanov I.D. Modern monopolies and competition. - M.: Thought, 1990, p. 89.
5. Fisher S., Dornbusch R., Schmalenzi R. Economics. M. - 1993. - S. 28-29:
6. Encyclopedia of interesting articles of the portal "Excelion.ru".
7. http://articles.excelion.ru/science/em/47067409.html
8. FINANCIAL AND ANALYTICAL CENTER http://lib.mabico.ru/589.html
State University - Higher School of Economics
Institute for Professional Retraining of Specialists
Department of Economic Theory
ESSAY
On the topic of: Goals and methods of regulation of natural monopolies
Student: Seliverstova Lyudmila Sergeevna
Group No. 18EUP-1
Moscow, 2009
Introduction 3
1. Existing methods of regulation in natural monopoly; 4
2. Goals of natural monopoly regulation; 5
3. Methods of state regulation of activities are natural monopolies 6
3.1 Identification of market boundaries as a methodology for state regulation of natural monopolies; 9
3.2 Methodology for identifying market boundaries. 9
Conclusion; 12
Bibliography. thirteen
Introduction
The problem of monopoly in the economy has been of interest to economists for almost the entire twentieth century. This topic has been and will remain relevant as long as there are world economic giants that firmly occupy a monopolistic place in production.
Reducing the level of monopolization of the economy, the formation and maintenance of a competitive environment, the high-quality conduct of antimonopoly policy remain the key tasks of economic policy at the present stage. Of particular relevance is the problem of ensuring an acceptable combination of competition and monopoly for society, which determines the conditions and efficiency of management, the motivation of economic entities, the formation and distribution of income, and, ultimately, the pace and level of socio-economic development.
In the conditions of modern Russia, the development and support of competition have become one of the key areas of economic policy. However, there are sectors in the economy where competition is impossible or inefficient for objective reasons (spheres of natural monopoly). Meanwhile, the lack of effective competitive mechanisms and the threat of abuse of economic power by subjects of such monopolies forces the state to create a special system of regulation in the field of natural monopolies, aimed at achieving a balance of interests of consumers and subjects of natural monopolies, ensuring the availability of the goods they sell to consumers and the effective functioning of subjects of natural monopolies.
The work is written on the basis of scientific papers and articles in the field of economic theory.
Purpose: To consider the existing methods of regulation in a natural monopoly.
The subject of the study is the goals and methods of regulation of natural monopolies on the example of Russia, the USA, Great Britain and other countries.
The abstract covers:
· Application of the Federal Law “On Natural Monopolies”, which outlines some methods of state regulation of the activities of natural monopolies;
· methods of identification and allocation of market boundaries, as well as the goals of state regulation of natural monopolies.
1. Existing methods of regulation in a natural monopoly
In an economic system, there are cases where monopoly becomes more efficient than competition. Such a case is called a natural monopoly, i.e. when one firm can produce enough goods to supply the entire market at a lower cost than two or more firms could. This concept contains a contradiction, the resolution of which is the task of the state socio-economic policy. Indeed, on the one hand, the existence of such goods is recognized, the production of which is most efficient in a monopoly market, and, on the other hand, in the absence of competition, a single producer can abuse his position in the market in order to maximize his profits. Moreover, as shown in theory, the selling price of products chosen by the monopoly to maximize its profits is always higher than the competitive price, and society as a whole incurs losses. In this situation, the state should regulate the activities of a natural monopoly in such a way that, while not allowing the monopolist to dictate its terms to consumers, it should at the same time give it the opportunity to successfully function and develop.
In a broad sense, regulation can be defined as the intervention of state bodies in the work of market mechanisms in order to correct the behavior of market agents, and hence the results of the market.
Ideally, the state regulates only in cases where the functioning of the market as such gives unsatisfactory results. It is assumed that the benefits of government intervention outweigh all the costs associated with it, that is, the ratio of benefits / costs of regulation exceeds unity where:
· Competitive resolution of the issue is impossible - this is a situation of natural monopoly;
· Competition exists, gives relatively effective results, but due to certain problems with market participants and activities, effective results may be undesirable (subject to state regulation);
For example, competition may “decide” that providing transport services to remote, sparsely populated areas is unprofitable and cancel these routes. Efficiency will be achieved, but equality and justice will be violated. And efficiency is not the only goal. Economists are sometimes shy about the goal of "fairness" and "equality", believing that if transfers are to be made, they can be done through tax leverage or lump-sum payments. But since such events themselves require certain costs, the solution cannot be so simple and unambiguous. Transaction costs play a significant role.
· A competitive solution is possible, but inefficient due to externalities or information asymmetries (subject to state regulation).
One of the developed forms of regulation is regulation that corrects external effects (externalities) that are the cause of the breakdown of the normal “competition-efficiency” relationship. Many industrial activities generate externalities that are negative for the wider community. For example, fossil fuel power plants emit harmful emissions into the atmosphere, after which oxide rains are shed. It turns out that the marginal social costs of such production exceed the marginal costs of a particular firm. In many cases, the producers of harmful externalities themselves are ready to adjust their activities in order to minimize externalities. Such conscientiousness of the company is not often shown.
The state does not seek to make all markets perfectly competitive, but seeks to eliminate the serious shortcomings of the market. It creates an environment where competition is encouraged rather than monopoly, where the first option of behavior is more profitable than the second. Thus, the antimonopoly policy is an instrument of administrative regulation of the economy, in order to prevent violations of the economic balance or socially undesirable changes, its main points are:
· Protection and encouragement of competition;
· Control over firms that occupy a dominant position in the market;
· Price control;
· Protecting the interests and promoting the development of small and medium-sized businesses.
Regulation can take various forms. The key difference is between direct and indirect regulation. Direct regulation includes any measure or action directly directed at a market agent (or group of agents), while indirect regulation covers everything that affects the economic and market conditions common to all actual and potential participants.
2. Goals of natural monopoly regulation
The primary goal of regulation is to eliminate inefficiencies without creating new distortions. Regulation exists to facilitate the implementation of public policy goals, among which, in the natural monopoly industries under consideration, the following are of paramount importance:
· Economic efficiency;
· Reliability of supplies;
· Social goals (social justice, equality);
· Objectives of environmental protection.
The goal of regulation by the authorities is to achieve the desired results for consumers when competition cannot be relied upon. If the regulator had enough information about the regulated firm, then the disputes about the methods of setting prices for the products of a natural monopoly would disappear by themselves (it would be easy to force a monopoly company to produce the desired amount of products at optimal prices, using the best combination of factors production). But since it is often impossible to establish a firm's marginal cost function due to opposition from the regulated, the task of officials becomes to encourage it to produce a socially necessary volume of output without denying the possibility of obtaining such a desired profit. And it's not easy at all. The theory of regulation aims to create such a mechanism for influencing a natural monopoly, which would allow achieving optimality. But to do this, you first need to find the best combination of price and output, and then propose a plan of action that will allow you to achieve this combination. The purpose of state-legal regulation is to maintain or establish a balance between the interests of consumers and the interests of subjects of natural monopolies, to streamline their activities by introducing rules of conduct.
3. Methods of state regulation of the activities of natural monopolies
The problem of the need to regulate natural monopolies was recognized by the state only by 1994, when the rise in prices for their products had already had a significant impact on undermining the economy. Therefore, the Russian Federation adopted the Federal Law “On Natural Monopolies” dated August 17, 1995, which determined the industries related to natural monopolies and the scope of their regulation. At present, three major natural monopolies have formed in Russia: RAO Gazprom, OAO Russian Railways, and OAO RAO UES of Russia. According to the Law "On Natural Monopolies", the scope of regulation includes transportation of oil and oil products through main pipelines, transportation of gas through pipelines, services for the transmission of electrical and thermal energy, rail transportation, services of transport terminals, ports and airports, services of public and postal
connections. An analysis of the results of the application of the Federal Law “On Natural Monopolies” makes it possible to single out some methods of state regulation of the activities of natural monopolies.
The three most common methods of regulation in a natural monopoly are:
· Direct state regulation (opportunities and boundaries);
· Bidding for a franchise (possibility of use and efficiency in various conditions);
· Price discrimination (organizational and economic aspects).
Consider direct state regulation: Most often, the mechanism and boundaries of such regulation are determined by national legislative acts. Direct government regulation by setting tariffs or decisively influencing them for natural monopolists is a fairly simple and understandable way to reduce the role of negative factors that exist in their activities. In Russian legislation, this method is given paramount attention. However, there are several problems with this approach:
· the need to create a body of state control over the activities of a natural monopolist or to give such functions to an already existing antimonopoly structure. This carries the threat of substituting the public interest for the interests of the ruling groups, not to mention the corresponding costs for the maintenance of state officials;
· the difficulty of accurately determining the real costs of a natural monopoly service provider.
Talking about bidding for a franchise, we will deal with contract system as a form of economic organization. The contract is concluded with the manufacturer (economic entity) that offers the best conditions (lower price, greater range of services, etc.). Should we expect that the contract system will solve the problem of natural monopoly once and for all? Of course not.
In the first case, prerequisites are created for the emergence of a private unregulated monopoly with the establishment of a monopoly-high price that society as a whole has to pay (we are dealing with a direct public harm of the monopoly. In the second case, all the shortcomings of the administrative, and not the economic system, are manifested, where the processes of politicization take place solving the problems of natural monopolies (in the interests of the state and the ruling elites, but not in the interests of society as a whole).
The phenomenon of natural monopoly is no exception, so bidding for a franchise in the regulation of natural monopolies is one of the equally likely options. On the whole, the authors agree with O. Williamson's conclusions based on the study of the American experience of using bidding for a franchise (for Russia, this is most likely “exotic”). Franchise bidding has made it possible in the United States to solve problems with some natural monopolies, and in a better way than other ways of regulating them. This applies to the deregulation of trucking, to the organization of the work of local airlines, the postal service, to the work of cable television networks, in some cases - to the work of public utilities, to the problem of deregulation of railways.
Speaking of natural monopolies, one cannot ignore one more way to regulate them - price discrimination .
Natural monopolies quite often resort to the practice of price discrimination to maximize their net income. To do this, they segment the market. An example of such an approach would be the practice of establishing
higher tariffs for electricity, gas, communication services, utilities for enterprises and organizations and, accordingly, lower tariffs for citizens.
It is also possible to use multiple tariffs depending on the time of provision of services (communications, electricity, railway and air tickets, etc.). However, the same mechanism can be used not only by a natural monopolist, but also by the state, which seeks to alleviate the burden associated with a monopoly. It can set decreasing tariffs for social
ally unprotected groups of the population (pensioners, disabled people, etc.). For example, the practice of preferential tariffs for various types of services provided by natural monopolies is widely used. The source of coverage for these benefits is important here. However, very often in Russia it is either not determined, or without appropriate calculations, unreasonably, it is shifted to the manufacturer. The most common example is utility bills. To date, the number of “beneficiaries” is already comparable to the number of people, benefits are not
having. This contributes neither to the stabilization of the social situation, nor to the normal reproduction of the capital of a natural monopoly enterprise.
The practice of using price discrimination can be applied by the state not only in the case of direct state regulation of a natural monopoly, but also in the case of bidding for a franchise. Thus, price discrimination becomes a "double-edged weapon" that can be successfully used by both the natural monopoly and the state to achieve their goals. As a result, a certain “balance of interests” arises, and the severity of the problem
on the part of the natural monopoly is softened (smoothed out, removed).
In reality, state control over natural monopolies consists both in state ownership of a controlling stake and in the existence of special antimonopoly legislation regulating the methods of tariff regulation and control over the activities of natural monopoly entities, as well as determining the list of consumers subject to preferential or mandatory service. Russian legislation aimed at regulating natural monopolies provides not only for state tariff regulation, but also for limiting their disposal of property (primarily that they inherited as a result of privatization). At the same time, if the enterprise is not state-owned, then its regulation boils down to the following: either prices are set at the level of average monopoly costs, or two-component tariffs are applied that provide for a separate and fixed fee for access to services, as well as payment for each unit of paid services.
3.1 Identification of market boundaries as a methodology for state regulation of natural monopolies
Let's try to formulate the main methodological principles of state regulation of natural monopolies.
As a result of the allocation of market boundaries, the following definition can be given.
Natural monopoly as an object of state regulation is a sphere of economic activity where competition or economically inefficient, or impossible due to the specifics of the technological process of production of goods (services), or contrary to the interests of society (the state).
Such a definition clearly reflects the objectivity of state regulation of a natural monopoly.
At the same time, how to distinguish a natural monopoly from a monopoly in general?
chief sign the indivisibility of infrastructure is a natural monopoly, its other features follow from it:
subadditivity of costs;
Homogeneity and irreplaceability of products;
· endogeneity of the structure of industry companies as vertically integrated;
social (public) significance.
Natural monopoly as an object of state regulation is divided into a natural monopoly core, identified on the basis of the economic and technological boundaries of the market, and an adjacent natural monopoly segment, allocated based on the social and strategic boundaries of the market chosen by society. It is fundamentally important that a natural monopoly also includes areas that are potentially competitive, but limited by society.
3.2 Methodology for identifying market boundaries
The above analysis of the Russian legislative framework illustrates the imperfection of the definition of natural monopolies, which leads to the inefficiency of the choice of instruments of state regulation. In our opinion, the methodology for identifying natural monopolies should be based on the identification of such sectors within a multi-product industry where competition is impossible and/or inefficient. Let's call it market boundaries, among which we highlight:
- economic;
- technological;
- social (public);
- strategic.
Economic the theory assumes that an industry is a natural monopoly if, at all levels of output, the cost function C(q) is subadditive, i.e. inequality holds. This means that if n firms in total produce output q, then their total cost of producing all output will always be higher than the cost of a single firm producing all output q.
In a strictly theoretical approach, the economic boundaries of the market delineate only the infrastructure segment, which became the basis for a liberal approach to natural monopolies and their reform. A purely economic approach without taking into account the specifics of the industry, in our opinion, does not fully reflect the essence of natural monopoly and its role in the development of society. Such total liberalization is as extreme as a planned economy. The purely economic principle of identifying the natural monopoly sector is the main shortcoming of the modern theoretical paradigm in the study and regulation of natural monopolies.
Technological boundaries determined by the impossibility of the existence of competition due to the technical and production features of the industry . In each infrastructure industry, the technological boundaries of the market are distinguished differently due to the technological features of the industries. But it is precisely the identification of the technological boundaries of the market that makes it possible to say whether direct state regulation should be limited to the infrastructure segment, as a natural monopoly core, or whether the boundaries of the free market should be narrowed.
Social (public) boundaries it is necessary to allocate on the basis of the principle of public utility (significance). Products of the natural monopoly sector are present in the cost of almost all goods and services. Low prices for the products of infrastructure industries are one of the most significant competitive advantages of the Russian economy. Moreover, goods (services) of natural monopolies are directly consumed by the population. This determines the special role of the natural monopoly segment for the state and the life of society. Recognition of the social (public) function of natural monopolies will make it possible to identify those areas in which, due to social significance, competition may be impossible and even dangerous, and prices must be regulated, and in some cases subsidized by the state. This mainly applies to areas serving the population. For example, in no country in the world, except Japan, rail passenger transportation has become profitable, and all developed countries subsidize them. The project of regional gasification is also impossible without the participation of the state, or without the existence of a monopoly by OAO Gazprom, since in a competitive environment it is unlikely that any of the companies will take on these functions. In the power industry, competition in the retail market can be dangerous in general. Stability of energy supply is a matter of national security. And any "imperfection" of the market in the electric power industry due to the impossibility of storing electricity can be much more serious in terms of consequences for society than in any other.
Strategic boundaries are close to social and also outline areas where competition should be limited due to strategic (political or geopolitical) reasons. This delineation is by no means the creation of a monopoly market in traditionally competitive industries, as representatives of ultra-liberal ideas are trying to prove. For industries of the natural monopoly sector, the vertically integrated organization of economic relations in the industry is more “natural”. The principle of endogeneity of the structure of natural monopoly industries is expressed in the fact that the division of a natural monopoly industry into competitive and natural monopoly activities is an artificial process, as a result of which a vertically integrated company is formed again.
So, for example, after the reforms of the electric power industry carried out in the UK (one of the most liberal reforms of the electric power industry was carried out in the UK), it was necessary to “return to the starting point” - generating companies were allowed to participate in the privatization of distribution companies. As a result, vertically integrated companies have emerged that not only produce electricity, but also distribute it. Creation of vertically integrated companies, incl. Merging with fuel companies is a key trend in all liberalized energy markets. It follows that the hasty and artificial unbundling of energy companies, not driven by the market, ultimately leads only to “reverse” consolidation.
Given the above, we can conclude that the division of the natural monopoly industry by separating the actual monopoly core is premature. Practice shows that in many cases, after the actual division of the natural monopoly into areas of activity, the reverse process was outlined in the future.
CONCLUSION
Without a doubt, it is the efficiency of the functioning of natural monopolies that can determine the competitiveness of the Russian economy in international markets, not to mention the infrastructure support for the entire life of the country. And it is precisely the discrepancy between the structures of natural monopolies and the system of their state regulation of the achieved degree of development of market relations, as well as the conditions for integration into the world economic space, that necessitated their reform.
Antimonopoly legislation should be reasonable and thoughtful, and its application by employees of regulatory agencies should be a regulatory mechanism for the market, but nothing more, since excessively rigid antitrust policy can lead to a large imbalance in established market relations and cause dissatisfaction among employees of large firms.
LITERATURE
1. Federal Law of the Russian Federation "On Natural Monopolies" dated August 17, 1995 No. 147-FZ;
2. Akulov V.B., Rudakov M.N. "Organization Theory" textbook. Petrozavodsk: PetrGU, 2002;
3. Korolkova E.I. HSE Economic Journal No. 2 2000 Lecture and teaching materials "Natural monopoly: regulation and competition" p. 235-236, 242-243;
4. Ivanov I.D. Modern monopolies and competition. - M.: Thought, 1990, p. 89.
5. Fisher S., Dornbusch R., Schmalenzi R. Economics. M. - 1993. - S. 28-29:
6. Encyclopedia of interesting articles of the portal "Excelion.ru".
7. http://articles.excelion.ru/science/em/47067409.html
8. FINANCIAL AND ANALYTICAL CENTER http://lib.mabico.ru/589.html
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