MARKET STRUCTURE

Market Structure

Market Structure

Introduction

Following microeconomic reforms of the 1980s and 1990s, excluding government agencies, corporations subject to regulation now provide almost half of Australian's employment and of its GDP. The analysis of regulatory regimes must, therefore, account for economy-wide implications, such as effects on the real exchange rate and factor markets as well as on other industries through the cost of intermediate services. This is best achieved by modeling the whole Australian economy in a way that allows explicitly for the monopoly and oligopoly behavior requiring regulation in the first place. Such a model is offered in this paper. It is designed to help clarify the implications of changes in the regulation of oligopoly pricing for the structure and performance of Australia's service industries while at the same time examining inter-sectoral effects and associated changes in the performance of labor markets and the economy as a whole.

The retreat from the government's direct provision of infrastructure services has left private firms and publicly-owned corporative entities (government bodies subject to corporations' law) in industries that are littered with oligopoly structures and component monopolies. These firms and entities are therefore supervised by regulatory agencies. They include: transport, electricity, water supply, gas distribution, telecommunications, finance and insurance, education and health. while regulatory policies cover both product pricing and quality, we focus entirely on price regulation, including price surveillance as well as price caps, and hence the control of economic costs associated with distortions due to imperfect competition.

The retreat from the government's direct provision of infrastructure services has left private firms and publicly-owned corporative entities (government bodies subject to corporations' law) in industries that are littered with oligopoly structures and component monopolies.

Some existing studies suggest an indirect link between the privatization and regulatory reforms and productivity, while other studies follow a long tradition ...