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Industrial Economics Does the U.K. Competition Commission use Austrian Economics?

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Presentation on theme: "Industrial Economics Does the U.K. Competition Commission use Austrian Economics?"— Presentation transcript:

1 Industrial Economics Does the U.K. Competition Commission use Austrian Economics?

2 Neo-classical Economics Austrian Economics Methodology Cost / Benefit Analysis Efficiency Market Failure Public Interest Correction Industrial Economics - Barriers to entry Abnormal profits

3 Pm PcP=MC MR D QmQc Q0 £ Deadweight Loss of Monopoly Monopoly Profits Consumer Surplus Monopoly Reduces Social Welfare = Monopoly = Perfectly Competitive Firm

4 Neo-classical Economics Austrian Economics Methodology Cost / Benefit Analysis Efficiency Market Failure Public Interest Correction Industrial Economics + R&D Economies of scale - Barriers to entry Abnormal profits

5 MC (Monopoly) MC=S D Q1QM PM P1 A B C 0 Q £ MR Monopoly Increases Social Welfare = Monopoly = Perfectly Competitive Firm

6 Neo-classical Economics Austrian Economics Industrial Economics Problems Natural Resources Abnormal profits Patents Mergers Barriers to entry

7 Neo-classical Economics Austrian Economics Industrial Economics Problems Natural Resources Substitutes Abnormal profits Reward for success Patents Barriers to entry Mergers Ok Barriers to entry Consumer preference

8 Neo-classical Economics Austrian Economics Competition Commission Industrial Economics MMC –> Competition Commission (CC) in 1999 20 members, mainly non-economists Austrian Economics during 80s Cost/ Benefit Analysis

9 Neo-classical Economics Austrian Economics Morrisons/ Safeway Industrial Economics ASDA, Tesco and Sainsbury’s prohibited Costs > Benefits Neo-classical approach

10 Neo-classical Economics Austrian Economics Morrisons/ Safeway Industrial Economics Collusion no problem Alternatives available P Q = chance International competition

11 Neo-classical Economics Austrian Economics Bass (UK)/ Interbrew (Belgium) Industrial Economics Costs > Benefits Interbrew divest 75% Neo-classical approach

12 Neo-classical Economics Austrian Economics Bass (UK)/ Interbrew (Belgium) Industrial Economics Takeover ok Consumers’ will Chance for competitors International competition Only short-term effects

13 Neo-classical Economics Austrian Economics Conclusion Industrial Economics No evidence of Austrian Economics C/B Analysis Internationally more market based

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