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This chapter critically examines the prospect that competitive markets might serve as an alternative to democratic accountability. It identifies ways that market globalization has undermined conventional democratic accountability relations. It then outlines the basic parameters of the market accountability concept, paying particular attention to the notion of “exit” (typically opposed to “voice”). The chapter critiques arguments about the superior information-processing faculties of markets, as well as arguments about markets’ freedom-enhancing implications. Markets generate externalities and can have dislocating effects on the environment and society for which they are unable to account adequately. Due to its reliance upon unequal market power, market accountability can also reinforce relations of dominance and exploitation, while undermining democratic capabilities and political forms of agency. The chapter does, however, identify countervailing trends, including efforts to politicize market accountability through activist consumer movements. Despite their ambitions, these consumer-citizen initiatives still rely upon asymmetrical power structures of economic inequality they ultimately cannot substitute for political forms of democratic accountability.

A critical determinant of whether exchanges, central counterparties, and central securities depositories should be considered infrastructure institutions is whether they have market power. This chapter explores whether they do, specifically in the provision of trading, clearing, central register, and settlement services. It examines four general issues and provides some broad comments on the nature of market power. It discusses the key factors that lead towards consolidation of market power in each industry sector, and those that tend to promote competition and reduce market power. It then presents brief comments on the industry structure in practice in each of the three sectors. Finally, a range of generic propositions about the industry structure in each of the three sectors are articulated.

This chapter examines unilateral market power. The exercise of such power sometimes constitutes a competing explanation for price elevation in oligopolistic industries. This possibility raises three questions: whether exercising unilateral market power is also usually socially undesirable and thus should be prohibited by competition law; if it is not, how one can distinguish it from coordinated price elevation; and how one should err in cases of uncertainty. Analysis focuses both on industries with homogeneous goods and on those with differentiated products, the former of which are more relevant for present purposes because coordinated pricing is generally thought to be difficult when differentiation is substantial.

This chapter shows that although American environmental groups had little success in influencing federal energy policies, they contributed to a significant increase in local demand for renewable energy. The chapter shows how environmental groups shape organizations' decisions to purchase green power. Many environmental groups offer crucial mobilizing resources for green‐power champions. Others act as brokers who connect organizations with renewable energy developers or utilities, as certification agents who verify the purchase of renewable energy certificates (RECs), or as organizers of protests, boycotts, or shareholder activism. The analysis demonstrates that, while environmental groups and activists can sometimes pressure organizations to change “from the outside” through protests, boycotts, and lawsuits, their most significant impact is through creating change “from the inside.” In the case of colleges and universities, national and local environmental groups have pushed for green‐power purchases both bottom‐up, by organizing student campaigns for clean energy, and top‐down, by coordinating a network of college and university presidents who are committed to addressing climate change. In the case of companies, environmental groups have pushed for green‐power purchases mostly from the center by offering resources to mid‐level employees and environmental managers.

Offers an in-depth discussion of regulatory and competitive issues in German banking. Emphasising that regulation, market structure, and competitive conduct are deeply interrelated the authors look at bank regulation from an Industrial Organisation perspective. Special consideration is given to the three-pillar structure of German banking comprising private, public, and co-operative banking institutions as well as to the driving forces that shaped bank regulation and supervision from its beginning in 1931. To assess market structure and competition in Germany’s banking market, the available empirical evidence is carefully discussed. A concluding section points to the challenges stemming from the decision to phase out state-guarantees for public banks.

Anti‐trust economics has not sufficiently recognized the nature of competition and innovation in high‐technology industries, the evolution of those industries and the implications for public policy. This chapter presents some conceptual frameworks and methods for understanding, in particular, issues of monopoly and monopolization. Understanding issues such as the nature of technological change, competition, barriers to entry, and market power are important for anti‐trust policy. Without understanding the limitations of the existing analytical tools for analysing the economics of innovation, antitrust agencies may harm competition in high‐tech industries.

This chapter discusses the concept of dominance and demonstrates that, under Article 102, dominance is the ability to harm competition. This dynamic concept of dominance is consistent with the objective of Article 102, which is not to address market failures resulting from market power but to prohibit certain unilateral conduct that harms long-term social welfare. Having defined dominance, it goes on to examine the three necessary elements of the dominance test: substantial and durable market power, the presence of dynamic barriers to entry, and the absence of countervailing buyer power.

Wages differ in industries and companies in ways that go beyond the effect of differences in ability plus working conditions. These extra differences rise for the reason that wages reflect not only the outside forces but also the internal forces (value added per worker). There is sufficient evidence that inside factors are more significant when wage-bargaining is decentralized and when product markets are less competitive. Wages are higher in larger corporations. This is for the reason that large corporations have higher product market power and more powerful labour unions, in some cases.

This chapter starts with a discussion of the development of the highly diversified business/industrial groups that have grown in late‐industrializing countries – as exemplified by the zaibatsu in Japan, and the chaebol in South Korea. Such big businesses raise various issues, including economic performance, and their social effects, but this chapter is mainly concerned with two further issues: the magnitude and causes of concentration, of which there has been no systematic study; and the support of, and the discipline by, the government. These issues are discussed under the headings of market concentration, corporate strategy towards diversification, and the discipline of monopoly power.

According to accepted economic theory, industrial expansion can be explained by one of two grand approaches, market oriented or institutional, and success is usually interpreted as a validation of market principles and of the institutions financially supporting them. In South Korea, in contrast, the government made most of the pivotal investment decisions, the firms involved operated with an extraordinary degree of market control, protected from foreign competition, and relative prices were not got right, they were deliberately got wrong. This chapter offers a new paradigm to explain the behavior of the growing economies of late industrializing countries, based on the historical record of deliberately getting prices wrong, and the disciplinary mechanism involved.

This chapter explores the dynamics of the heroin market, as evident in its response to the Taliban opium cutback. It discusses the observed changes in the price and purity of opiates throughout the market as outcomes of interactions between supply and demand. It analyses the issues of market power and segmentation, specifically in relation to the apparent effect of the Taliban ban. It provides evidence for short-run supply rigidity and consequent price increases, the potential for expansion in other regions and the cushioning effects of inventory.

Joskow’s focus on energy markets was not solely an academic pursuit. It also animated certain leaders of the energy industry, including Ken Lay, an ambitious corporate empire builder who seized on commercial opportunities presented by deregulation of the natural gas industry and then applied lessons learned to the electricity business. Like Insull, Lay was driven by ambition and adept at seizing the main chance. Through a series of astute corporate acquisitions he gained control of the nation’s largest gas transmission system and renamed his company Enron just as regulatory changes were transforming the natural gas industry. Enron became a player in the natural gas spot market and refined its business strategy when Lay recruited Jeff Skilling, a former McKinsey consultant, who revolutionized the gas market through a gas bank, derivative contracts, volumetric production payments, and tradable gas purchase contracts. These innovations transformed natural gas from a physical commodity to a financial commitment. Deregulation of energy markets and Enron’s command of energy trading came just as financial institutions began to use derivatives and other exotic investment tools. Lay saw electricity as the next energy frontier and became an ardent proponent of deregulation. Using political influence to limit regulatory oversight, Enron became a major middleman, market-maker, and financial intermediary. In just a few years it commanded almost one-fifth of the North American wholesale electricity market and acquired a West Coast electric utility. Between 1996 and 2000, driven by Enron Online, a proprietary energy trading website, Enron’s revenues rose to $100 billion. But the progress, aided by fraudulent accounting, masked huge underlying problems. Lay and Skilling saw the newly deregulated California energy market as a one-off profit-making opportunity and potential salvation for their company. By withholding supply and using exotic techniques to game the California power market, Enron was able to create artificial shortages and drive up prices. Its political influence delayed government oversight, allowing Enron to extract enormous profits from the California market until FERC belatedly imposed a price cap. As the California market returned normal, Enron’s profit gusher subsided, and its ramshackle and fraudulent business headed relentlessly toward what was then the largest bankruptcy in history. In 2006 Lay and Skilling were tried and convicted in federal court. Lay died suddenly while his appeal was pending, and his conviction was extinguished. A soi-disant believer in markets, he proved instead to have been, for a time, a supremely adept market rigger whose rhetoric and practice were violently at odds.

Data in this chapter show that mass media in the United States have, in the aggregate, steadily increased in concentration since 1988. But they also show that the concentration on a national basis is usually fairly low by the standards of US antitrust. Here, the official US Government guidelines define an unconcentrated industry as having a Herfindahl-Hirschmann Index (HHI) of less than 1,000. But the problem with the HHI (and the C4) is that although it considers market power, which is essential, it does not make allowance for pluralism, which is also essential. That is, it looks only at actual choices rather than at options. This chapter proposes a new measure for media concentration, known as the Media Ownership Concentration and Diversity Index. It takes into account the regular HHI for market power (the sum of squared market shares) as well as the number of voices in a media market. As one divides concentration by voice value, the ratio (the index) rises in size with more market concentration and with less diversity, and declines with less concentration and more diversity.

Power system operation is a critical function and the role of the system operator becomes crucial in the context of the emerging imperatives of competition and promoting renewables in the electricity sector. This chapter covers the legal and policy provisions regarding the role and functions of the system operators at the national level, regional level, and state level. It explains the need for independent system operation for effective functioning of the power market and then critically examines the present state of functioning of the load dispatch centres in the country at different levels. The chapter also dwells on the debate over Transmission System Operator versus Independent System Operator model in the backdrop of system operation in India. The chapter covers a detailed analysis of ring-fencing of load dispatch centres and emphasises the need for operational and financial autonomy of the organizations operating the load dispatch functions. In the context of the functioning of the load dispatch centre at the state level, there have been some critical developments with long-term ramifications on power sector reforms. This chapter examines these issues and also suggests the way forward.

This chapter explores the underpinnings of the mutual distrust between intellectual property (IP) and antitrust and the various stages of their relationship. It begins by discussing the conflict between IP and antitrust. It then traces the three stages of the intersection in the 20th century, in which courts first refused to impose liability for patent-based activity, then limited patentees' power, then moved toward a predominant IP. The chapter concludes by examining important agency guidelines and courts' analyses of refusals to license.

The Federal Power Act, New Deal legislation that regulated wholesale electric rates, did not require the nation’s utilities to interconnect or coordinate their activities. The government could not order one utility to wheel power for another. A vertically integrated utility could therefore protect the electricity it generated from competition by denying third parties access to its transmission lines. Utilities were not common carriers. By the 1970’s, the industry was seen by critics to be an inefficient monopoly enterprise, protected by regulation from price competition except for limited application of the antitrust laws, until an obscure provision of the National Energy Act of 1978, Carter-era legislation, changed the field of play by requiring utilities to purchase power from cogenerators and small power generators at long-run avoided cost, freeing the sellers, called qualifying facilities, from onerous regulation as utilities, giving them transmission rights, and creating out of whole cloth an independent generating sector. Insull’s regulated monopoly model now confronted irreversible change. Free-market economists, among them Paul Joskow of MIT, believed the old order was ripe for deconstruction. Shortly after the WPPSS fiasco, in 1983, together with Richard Schmalensee, an MIT colleague, Joskow co-authored a ground-breaking book, Markets for Power – An Analysis of Electric Utility Regulation, that was sharply skeptical of the industry’s protected monopolies and regulated prices. To create competition in the wholesale market for electric power, the authors found, transmission access was essential. They envisaged a regional power pooling and transmission operator that would own and operate the high voltage transmission network and independent generation companies that would sell power into an unregulated market at marginal prices. The operator would dispatch generation in merit order and make financial settlements. It was a bold model that eventually reshaped the power industry through rulings of the Federal Energy Regulatory Commission (FERC) and legislation that gave third-party independent power producers the right to require a transmitting utility to wheel power to a wholesale buyer and authorized regional transmission organizations to provide open access and self-scheduled transmission while also running a free and competitive market, including an energy auction. Deregulation also gained momentum at the state level, notably in California, which implemented a flawed restructuring scheme that froze retail rates and caused the state’s utilities to sell their generation assets and rely on a spot market in electricity for supply. The California market invited manipulation, shortages, and price gouging and eventually imploded. But Joskow’s vision took operative form on a regional basis as a work in progress and continues to define a restructured power industry.

The justification attributed to cooperative strategy may be based on several different economic theories and as such, this chapter attempts to take on an economic perspective in examining a company's actions and strategies. Although none of the theories discussed in this chapter are sufficient enough to be able to explain competitive advantage, usefulness, and credibility alone, the chapter is able to look into the features of each theory and how these may contribute to the strategy and operations of a particular organization. It attempts to look into the following economic theories and explains how each of these theories may be applied: market-power theory; transaction-cost analysis; agency theory; resource-based theory; transaction-value theory; real-options theory; and increasing-returns theory.

Environmental tax reform could bear heavily on manufacturing sectors that are energy‐intensive and highly traded, in particular if their options for adapting technology are limited. However, to the extent that such sectors can pass on the cost of the environmental taxes through higher prices charged to their customers, they will not suffer a lasting drop in profitability or output. To assess pricing power in key sectors, a model of long‐run price‐setting behaviour is specified and tested. Significant and plausible results emerged from this exercise. Of the six sectors analysed, the basic metals sector revealed least pricing power and, hence, greatest vulnerability, and the non‐metallic minerals sector revealed most pricing power. The results indicated that the world price, proxied by the US price, was less of a constraint than the EU price, proxied by the German price. Thus, international competitiveness fears are reduced not just where there is good potential for adapting technology, but also if application of environmental tax reform is EU‐wide.

This chapter develops a theory to explain how market power competition can lead to violence and strategic delay in international relations. When states have opportunities to change market structures to provide their firms with price-setting abilities, a competitive environment can emerge. Given the economic rents and political leverage that can accompany the ability to set prices in hard commodity markets, states may be motivated to take aggressive action to expand their territorial reach. This market power motivation can sometimes lead to war. However, when states are economically interdependent, they may be constrained from turning to violence. This can open up an opportunity for institutional settlements. However, in some cases, institutional rules and procedures can preclude states from reaching a settlement in line with their market power goals. When this happens, states may turn to strategic delay and attempt to gradually accumulate market power over time through salami tactics.