"Regulated firms and industries operate within the 

administrative process just as they operate within the

market; the regulatory process provides opportunities

for strategic behavior in pursuit of economic objectives.

Strategic use of the process does not necessarily

constitute abuse of that process." 

Bruce Owen and Ronald Braeutigam, The Regulation Game, 1978

Marginal-Cost Pricing Under Economies of Scale

Overview

Regulation has traditionally been viewed as correcting failures in the market mechanism. However, scholarly work preceding the recent deregulation movement highlighted inefficiencies introduced by the regulatory process. Experts on regulation now examine both the intended and unintended consequences of government intervention. Regulatory issues requiring economic analysis arise daily in the context of legislative and rule-making activities, the enforcement of regulations, antitrust cases, and rate proceedings. 

Antitrust in Regulated Industries

Analysis of economic behavior in regulated industries poses some of the most challenging problems in economics. Regulation sometimes produces incentives for anticompetitive activities that would not be undertaken by unregulated firms. 

Experience

EI economists have contributed to the professional literature on regulation and regulated industries. While serving at federal agencies, they have participated in the formulation and implementation of regulatory policies. EI economists study the effects of regulations, participate in writing comments in response to proposed rule-making, and on many occasions testify concerning regulatory issues.

EI economists have analyzed matters involving regulation or deregulation in many different areas, such as:

• Telecommunications—wireline and mobile telephone services, satellite services, telecommunications equipment, electronic information services
• Mass Media—television, television program supply, cable television, cable programming, radio, magazines, newspapers
• Health Care—hospitals, provider-service organizations, physician networks, health insurance, nursing homes
• Transportation—railroads, trucking, airlines, computer reservation systems, airports, pipelines, taxicabs
• Electric Power—delivered bulk power, transmission, retail electricity
• Natural Gas and Petroleum—market-based rates, incentive regulation
• Services—insurance, postal services, real estate brokerage, computer reservation services
• Banking—banks, thrifts, automatic teller machine networks, credit cards
• Food and Drugs—alcoholic beverages, tobacco, pharmaceuticals, fruits and vegetables
• Environment—natural resource damages, Superfund clean-ups, regulatory compliance, CAFE standards
• International Trade—dumping, countervailing duties, quotas, gray markets, services, standards
• Consumer Protection—deceptive advertising, disclosure, credit practices, product liability
• Financial Markets—program trading, intermarket regulation, off-exchange trading, insider trading