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Regulation vs protection of services: where to draw the line?

Regulation vs protection of services: where to draw the line?. Dr Philippa Dee Crawford School of Economics and Government. Defining protection. ‘Unduly’ restricting competition restricting entry into the market restricting competition for the right to be sole operator

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Regulation vs protection of services: where to draw the line?

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  1. Regulation vs protection of services: where to draw the line? Dr Philippa Dee Crawford School of Economics and Government

  2. Defining protection • ‘Unduly’ restricting competition • restricting entry into the market • restricting competition for the right to be sole operator • restricting exit from the market • Prices will be higher than they need to be • because incumbent producers can earn higher profits • because production costs are inflated (from red tape etc)

  3. Are standards a problem?

  4. Types of market failure – standards as a solution? • Scale or network economies → natural monopoly • Requirements for interoperability or interconnection • Does this require a single standard – if so, whose? And who will decide? • Information asymmetry • Standards to ensure quality • Do they operate ex ante or ex post?

  5. Standards to ensure service quality • Standards that operate ex post • Do not prevent entry, but punish bad behaviour or compensate losers after the event • Standard typically defined in terms of quality of output • Market-based solutions • product liability, professional indemnity insurance, warrantees • reputation • Standards that operate ex ante • Limit entry • Standard typically defined in terms of quality of inputs • Licensing, accreditation, quality assurance

  6. Preventing barriers to trade – depends on type of trade (1) • Intra-EU trade • trade between complex, advanced economies • not driven by differences in labour-capital availability • driven by gains from specialisation and gains from variety • trade is typically two-way • Harmonisation of standards • Mutual recognition

  7. Limiting barriers to trade – depends on type of trade (2) • Asia-Pacific trade • trade between economies at very different levels of development • often driven by differences in labour-capital availability, even for services • trade is typically one-way • Minimum acceptable standards • Unilateral recognition

  8. Regulation vs protection of services: where to draw the line? Dr Philippa Dee Crawford School of Economics and Government

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