DYNAMIC EFFICIENCIES AND WORKABLE/EFFECTIVE COMPETITION Comments on a Paper by William G. Shepherd Sea World Nara Resort, Gold Coast July 2004 Rod Shogren
Overview • Where the topic came from • What is effective competition? • Access regulation • Competitive processes
What is Effective Competition? • Effective vs. workable • Best we could reasonably expect • Best we can reasonably hope for • Where do we see it? • Regulatory implications
Why This is a Good Topic • Epic case • Biggar/Round debate – Static vs. dynamic – Questioning the building blocks approach – Is the ACCC out of step? • Use of perfect competition models
Perfect Competition • A pernicious doctrine? • Perfect vs. imperfect • Wrong conclusions • What can be done
Access Regulation • Setting prices • Importance of innovation • Cost + liberal margin – Cost of capital – Compelling innovation – Innovation by whom?
Efficiency and Rents • Allocative vs. dynamic efficiency • Incentives for bypass • Permanent vs. transitory rents • Retention of rents – Profit margin, incentive regulation • Feasibility of bypass
Has the ACCC Got it Wrong? • Prices too low? • Removing incentive for windfalls? • Asset base, WACC, CAPM? -------------------------------------------------------- --------- • Investment incentives
Competitive Processes • Competition driven by consumers • Information – Product information vs. proxies – Search costs • Switching – Portability • Constraints
Conclusions • Effective competition is the answer • What was the question? • Economic efficiency – Investment • Building blocks – Accountable and predictable – Consider the alternative
DYNAMIC EFFICIENCIES AND WORKABLE/EFFECTIVE COMPETITION Comments on a Paper by William G. Shepherd Sea World Nara Resort, Gold Coast July 2004 Rod Shogren
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