DYNAMIC EFFICIENCIES AND WORKABLE/EFFECTIVE COMPETITION Comments - - PowerPoint PPT Presentation

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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

SLIDE 1

DYNAMIC EFFICIENCIES AND WORKABLE/EFFECTIVE COMPETITION

Comments on a Paper by William G. Shepherd

Sea World Nara Resort, Gold Coast

July 2004

Rod Shogren

SLIDE 2

Overview

Where the topic came from
What is effective competition?
Access regulation
Competitive processes

SLIDE 3

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

SLIDE 4

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

SLIDE 5

Perfect Competition

A pernicious doctrine?
Perfect vs. imperfect
Wrong conclusions
What can be done

SLIDE 6

Access Regulation

Setting prices
Importance of innovation
Cost + liberal margin

– Cost of capital – Compelling innovation – Innovation by whom?

SLIDE 7

Efficiency and Rents

Allocative vs. dynamic efficiency
Incentives for bypass
Permanent vs. transitory rents
Retention of rents

– Profit margin, incentive regulation

Feasibility of bypass

SLIDE 8

Has the ACCC Got it Wrong?

Prices too low?
Removing incentive for windfalls?
Asset base, WACC, CAPM?
Investment incentives

SLIDE 9

Competitive Processes

Competition driven by consumers
Information

– Product information vs. proxies – Search costs

Switching

– Portability

Constraints

SLIDE 10

Conclusions

Effective competition is the answer
What was the question?
Economic efficiency

– Investment

Building blocks

– Accountable and predictable – Consider the alternative