oa Journal of Economic and Financial Sciences - Understanding economic regulation and competition in a developing economy : introduction to special issue : guest editorial
The most widely regulated markets are natural monopoly markets, where regulators impose limitations on monopoly behaviour regarding price, quantity or entry and exit into the market (Viscusi et al., 2000). A critical element of regulation is identifying the essential facilities or infrastructure where competition is not possible and enforcing measures to make sure access is provided on fair terms to different participants, along with ensuring appropriate incentives for investment. The articles in this special issue analyse how these challenges have been addressed by different regulators. There is also a strong link here with competition law provisions prohibiting abuse of a dominant position. Economic regulation and competition law enforcement is particularly important where there are entrenched dominant firms, which are also often vertically integrated into a range of related activities and may have incentives to exclude rival actual and potential participants. However, the case for economic regulation is much wider than simply constraining market power; it can also rest on information imperfections, the existence of incomplete markets and externalities, and the resulting income and wealth distribution effects (Jalilian et al., 2006).
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