Ministry of Education and Science Russian Federation
Federal agency of Education
NOVOSIBIRSK STATE TECHNICAL UNIVERSITY
Department of ECONOMIC THEORY
Coursework on economic theory on the topic:
Natural monopolies and their regulation
Faculty: Business
Group: FB-82
Completed by: Todua I.G.
Checked by: Shmakov A.V.
Novosibirsk
INTRODUCTION 3
1. Theoretical aspects 5
1.1 Concept and definition of natural monopoly 5
1.2 Advantages and Disadvantages of Monopolies 7
1.3 Ways of regulating natural monopolies 8
2. Natural monopolies in Russia 16
2.1 Impact of natural monopolies on pricing and production in the country 16
2.2 Features of natural monopolies in Russia 19
2.3 Antimonopoly regulation in the Russian Federation 22
CONCLUSION 26
List of sources used 28
APPENDIX A 30
INTRODUCTION
What are Russian natural monopolies: driving forces of the economy that can lead the country out of a protracted crisis or clumsy structures that have emerged from the planning and administrative system, hindering development market relations in Russia? The influence of these industries on the economy is especially great in conditions economic crisis in Russia. Moreover, their economic impact goes beyond the borders of our country. Question state regulation activity of natural monopolies remains acute throughout the years from the beginning of implementation economic reforms in Russia.
One of the main problems transition period Russian economy, not allowed until now, is the formation competitive markets... To ensure the high efficiency of market relations, it is necessary to form fundamentally new organizational conditions, to revise the methods of managing and regulating the activities of natural monopolies that have developed in a planned economy. Enterprises of natural monopolies, which together form the industrial infrastructure of the state, are the basis for the revitalization and further development of domestic industry, development real sector economy.
There are a large number of different market conditions, which allows us to talk about the imperfection of markets, one of such conditions is monopoly. Monopoly is an extreme form of imperfect competition, in which the monopoly firm is the only seller of a product that has no close analogues. Under such conditions, manufacturers can dictate their terms to consumers, and these terms do not correspond to their interests. To avoid the formation of monopolies in a state with a market type of economy, antimonopoly legislation is applied. But at the same time in the law there is such a concept as natural monopoly, this law allows the existence of monopolies in some areas of the country's economy and regulates their activities.
The object of this research term paper is one of the types of imperfect competition - monopoly.
The subject of the research is the concept of "natural monopoly" and methods of its regulation.
The purpose of this course work is to study ways to regulate natural monopolies and analyze the current situation in Russia.
1) give a definition of the concept of natural monopoly;
2) structure possible ways regulation of natural monopolies;
3) determine the impact of natural monopolies on the economy of the Russian Federation;
4) consider ways of regulating natural monopolies in the Russian Federation.
In my work, I used the legislation of the Russian Federation, statistical data, official data from the websites of companies of Russian natural monopolies, articles, books, study guides.
1. THEORETICAL ASPECTS
1.1. Concept and definition of natural monopoly
In a number of industries, it is impossible to avoid the formation of monopolies. You cannot have two gas pipelines in an apartment from two competing companies, several heat transmission lines, alternative sources of electricity, etc. In most infrastructure sectors, the formation of monopolies occurs naturally, and the state is forced to implement direct or indirect regulation in relation to them.
Below are some definitions taken from various dictionaries:
a) Modern economic vocabulary: natural monopoly - officially recognized inevitable monopoly on the production and sale of goods and services, in relation to which monopoly is due either to the natural rights of the monopolist, or considerations of economic benefits for the entire state and the population. Thus, a natural monopoly arises in those areas where copyright is in effect, because the author is a monopoly by law. On the other hand, it is in the interests of the state to have unified pipelines, energy networks, and railways. State monopoly also arises in those areas where its existence is due to considerations of public safety;
b) Dictionary of Economics and Mathematics: natural monopoly - a situation in which an industry producing (selling) goods and services effectively meets demand in the absence of competition due to the technological characteristics of production. Its goods (services) have a steady demand regardless of significant price changes, since it turns out to be impossible to replace them with other goods (example: the city's power supply system);
c) Dictionary "Accounting, taxes, economic law»: Natural monopoly - the state of the commodity market, in which the satisfaction of demand in this market is more efficient in the absence of competition due to the technological features of production (due to a significant decrease in production costs per unit of goods as the volume of production increases), and goods produced by natural monopoly entities , cannot be replaced in consumption by other goods, and therefore the demand for this commodity market for goods produced by subjects of natural monopolies is less dependent on changes in the price of this product than the demand for other types of goods.
In this work, I will start from the definition that is spelled out in federal law No. 147-FZ of August 17, 1995, because we are also talking about potentially hazardous industries, where control is much easier under conditions of monopolization, an example is nuclear power ...
According to this law: natural monopoly is a state of the commodity market, in which the satisfaction of demand in this market is more efficient in the absence of competition due to the technological features of production (due to a significant decrease in production costs per unit of goods as the volume of production increases), and goods produced subjects of natural monopoly cannot be replaced in consumption by other goods, and therefore the demand in a given commodity market for goods produced by subjects of natural monopolies is less dependent on changes in the price of this product than the demand for other types of goods.
Based on this definition, it turns out that in economic system there are times when monopoly becomes more efficient than competition. This case was called natural monopoly, i.e. when one firm can produce enough goods to meet the entire market demand, at a lower cost than two or more firms could. This approach contains a contradiction, the resolution of which is the task of the state socio-economic policy. Indeed, on the one hand, the existence of such goods is recognized, the production of which is most efficient in a monopoly market, and, on the other hand, in the absence of competition, a single producer can abuse his position in the market in order to increase his profits. Moreover, as shown in theory, the selling price of products chosen by the monopoly to maximize its profits is always higher than the competitive price, and society as a whole suffers losses. In this situation, the state should regulate the activities of the natural monopoly in such a way as not to allow the monopolist to dictate its terms to consumers, but at the same time to enable it to function and develop successfully.
1.2. Advantages and Disadvantages of Monopolies
At the same time, many arguments against monopolies are not without foundation. Of course, it is “easier for a monopolist to live” than for a manufacturer in conditions of perfect competition. Monopoly power over prices is fraught with the danger of taking the "easy path", since there is always a certain margin of safety. Therefore, large firms avoid too frequent and deep modifications of products. Individual inventions are often adhered to and implemented only in combination. “Big business” inevitably has a tendency towards bureaucratization and an increase in Χ-inefficiency.
MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION
Moscow State University
Economics, Statistics and Informatics (MESI)
in the discipline "Microeconomics"
on the topic: "Natural monopolies and their regulation"
MOSCOW 2013
Introduction
1. The concept of natural monopoly
2.Methods of regulation of natural monopoly
Conclusion
Introduction
There are a huge number of different market conditions, which allows us to talk about the imperfection of markets and consider the monopolistic component as the cause of this imperfection.
Markets in which either buyers or sellers take into account their ability to influence the market price are imperfectly competitive. A monopoly position is desirable for every manufacturer (entrepreneur), since allows you to avoid a number of problems and risks associated with competition. And also a monopoly position allows a manufacturer (entrepreneur) to independently limit competition in the market for a particular product and influence the pricing process, seeking favorable prices to obtain higher profits.
Monopoly is an extreme case of imperfect competition, where there is only one seller and no opportunity for others to enter.
The topic of natural monopolies is one of the most relevant in countries with market economy since the well-being and life of society directly depends on the action of natural monopolies. The Russian Federation can be especially highlighted, where the legislative framework far from ideal and socially unstable enough economic situation... To ensure a high standard of living and build a stable economy in the state, it is necessary to take into account the factor of natural monopolies.
1. The concept of natural monopoly
Natural monopoly arises due to objective reasons. It reflects a situation where the demand for a given product is best met by one or more firms. It is based on the features of production technologies and consumer services. Here competition is impossible or undesirable. The main features of a natural monopoly are:
a) The activities of the subjects of natural monopolies are more efficient in the absence of competition, which is associated with significant economies of scale of production and high conditionally fixed costs. These areas include, for example, transport.
b) High barriers to entry to the market, since the fixed costs associated with the construction of structures such as roads, communication lines are so high that the organization of such a parallel system performing the same functions (building roads and pipelines or laying a railroad bed is problematic) can pay off.
c) Low elasticity of demand, since demand for products or services produced by natural monopoly entities is less dependent on price changes than demand for other types of products (services), since they cannot be replaced by other goods. These products satisfy the most important needs of the population or other industries. Such goods include, for example, electricity. If we offer, the rise in car prices will force many consumers to stop buying their own car, and they will use by public transport, then even a significant increase in electricity tariffs is unlikely to lead to the abandonment of its consumption, since it is difficult to replace it with an equivalent energy carrier.
d) The network nature of the organization of the market, that is, the presence of an integral system of networks extended in space, through which a certain service is provided, including the presence of an organized network, which requires management and control from a single center in real time.
Natural monopolies occur because of the barriers to competition erected by nature itself. For example, a company whose geologists discovered a deposit of unique minerals and which bought the rights to land plot where this deposit is located. Now no one else will be able to use this deposit: the law protects the rights of the owner, even if he ended up as a monopolist (which does not exclude regulatory interference of the state in the activities of such a monopolist).
Techno-economic monopolies can be called monopolies, the emergence of which is dictated either by technical or economic reasons associated with the manifestation of economies of scale.
monopoly economy national
2. Methods of regulation of natural monopoly
Regulation of the activities of natural monopolies is a complex process involving a large number of participants from outside government agencies and various kinds non-profit organizations, acting both in the interests of consumers and the monopolies themselves.
Naturally monopoly legislation establishes monopoly rights in a number of "infrastructure" sectors, as well as the specifics of disposing of property in these sectors.
In accordance with Art. 3 of the Law on Natural Monopolies, a natural monopoly entity is an economic entity ( entity), engaged in the production (sale) of goods under conditions of natural monopoly. The concept of a natural monopoly entity does not include the condition for inclusion in the Register of natural monopoly entities subject to state regulation and control, and the condition for the approval of prices (tariffs) for the provision of gas transportation services. The fundamental feature of a natural monopoly entity, based on the definition given in the Law on Natural Monopolies, should be considered that the entity carries out activities under conditions of natural monopoly.
According to the order Federal Service according to tariffs dated September 26, 2004 No. 59 "On Approval of the Temporary Regulation on the Register of Natural Monopoly Entities Subject to State Regulation and Control" The Register of Natural Monopoly Entities is a database containing paper and electronic form information on business entities (legal entities) engaged in the production (sale) of goods (services) under conditions of natural monopoly in the fuel and energy complex, in transport, communications (name, legal and postal addresses, Bank details, phones, codes, data on the volume of services provided, revenue, etc.).
The register of subjects of natural monopolies is of a declarative nature and is formed on the basis of information received from federal executive bodies, executive bodies of the constituent entities of the Russian Federation and local self-government bodies, public associations consumers, their associations and unions, as well as at the request of the organizations themselves to include them in the Register, or exclude them from the Register.
The Prime Minister of the Russian Federation Vladimir Putin, by order N691-r of May 19, approved a program for the development of competition in the Russian Federation and an action plan for the implementation of the program for the development of competition in the Russian Federation for 2009-2012. The program says that in order to improve the system of regulation of natural monopolies, it is necessary to implement the following measures:
introduction of amendments to the federal law "On natural monopolies", providing for clarification of the concept of a natural monopoly entity, determination of the status of the register of natural monopoly entities and the procedure for monitoring economic concentration, delineation of powers of bodies regulating natural monopolies;
introduction of the method of economically justified return on invested capital into the system of state regulation of a number of industries, the method comparative analysis and other "quasi-competitive" mechanisms, which provide for the establishment of a long-term tariff that provides an acceptable rate of return on capital invested, as well as a mechanism that stimulates cost reduction and maintaining a certain level of quality of services;
ensuring the efficiency of the procurement activities of natural monopoly entities by establishing mandatory requirements for bidding. Such procedures should ensure transparency and competitiveness in the conduct of tenders, which will reduce the costs of natural monopoly entities and will help to reduce the growth of tariffs;
separation from the scope of activities of subjects of natural monopolies of certain types of work that can be performed by third-party companies on a competitive basis (for example, the implementation of part of the work to connect to the systems of the communal infrastructure);
intensification of work on the development of competition in spheres associated with natural monopolies, including through the division of entities into those engaged in competitive and natural monopoly activities. One of the important steps towards the implementation of this task is the development of methods for keeping separate records of these types of activities;
adoption of rules for non-discriminatory access to services of natural monopoly entities.
An important anti-crisis measure is to support demand by expanding purchases for state needs, as well as the needs of state corporations and natural monopoly entities.
monopoly economy natural
Conclusion
For the development of the economy, it is necessary to regulate the activities of natural monopolies, but precisely regulation, not fragmentation. Natural monopolies can not only organically fit into the economy of the region, but also raise its level to unprecedented heights. The problem of regulating natural monopolies has always had a special place. Maintaining a balance between the interests of the population and the monopolists is a very difficult task. To do this, it is necessary to determine tariffs in the most efficient and fair way, taking into account the interests of both parties. It is also necessary to stimulate enterprises of natural monopolies to reduce production costs, improve the quality of service. To carry out all these tasks, bodies for regulating natural monopolies have been created. Before making any decision to change the regulation, regulators conduct a thorough analysis of the industry, taking into account all the necessary aspects of their activities.
Bibliography
1. Burkeeva R.G. The nature and functions of natural monopolies / R.G. Burkeeva // Bulletin of Orenburg state university... - 2010. - No. 8 (114), August. - S. 9-11. - Bibliography: p. 13 (14 titles).
Varlamova A.N. Natural monopolies: concept, difference from related institutions, problems of legal regulation / A.N. Varlamov // Legislation, 2006. - No. 4. - P. 26.
Knyazeva I.V. Antitrust Policy in Russia: tutorial... - M .: Omega - L. - 2009, - S. 256.
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Natural monopolies and their regulation (organizational aspect). Market imperfections and monopoly. Natural monopoly as an objective phenomenon. Spheres of action. Barriers to entry into the industry and the number of efficient enterprises in the industry. The benefits and harms of natural monopoly. Failure of the market to solve the problem of natural monopolies.
In the previous sections, three types were considered quite fully and multifacetedly. economic organization from which any entrepreneur makes his choice. Now we will try to analyze the market type of economic organization in yet another specific form.
To begin with, remember that there are a huge number of different market conditions (see 2.1). They can be characterized through the prism of competitive and monopoly principles.
All this allows us to talk about the imperfection of markets and consider the monopolistic component as the reason for this imperfection.
It should be recalled that other, besides the market, forms of economic organization have already arisen and developed, but we have specially studied them. not because of market imperfections as a result of a monopoly. There were other reasons for this (the uncertainty of the external environment, the requirement of large guarantees, the desire to improve the efficiency of the organization's functioning, etc.). Now is the time to investigate the market form of organization precisely in connection with the existence of monopoly power.
An analysis of “ordinary” monopoly (capital-monopoly) is unlikely to be able to add something fundamentally new to our research. More often than not, monopoly capital “chooses” either the actual form of the intra-firm hierarchy, or the contractual system for guarantees and protection of its own transactions. We have answered these questions in sufficient detail in the sections devoted to the theory of firms, the contract system, and so on. By their existence, monopoly capitals undermine the market form of organization and do not often seek to choose it to protect their own transactions.
However, along with monopoly capital (firms), there is a very imperfect market form that allows us to add several new points to the analysis we have already done. This is a natural monopoly.
In a number of industries National economy objectively, the economy due to the growth of the scale of production, it is especially pronounced, and the competition is in fact simply unfeasible or extremely difficult. Such branches are branches of natural monopolies (or there is a natural monopoly in them as an objective phenomenon). This distinguishes this monopoly from capital monopoly. The “unit” of measurement of the first is, as a rule, the industry, where one economic entity actually operates, the “unit” of measurement of the second is a part industry market(or markets) in which (which) large capitals have a serious impact on the sale and purchase prices.
The branches of natural monopoly in many countries include most of the types of activities whose products are "subject to public use" - communications, power lines, oil and gas pipelines, railway transport, cable TV, communication systems, water supply and sewerage, etc.
Another feature of natural monopolies is the existence of very high barriers to entry into the industry. The presence of a single producer whose economies of scale are too large determines the amount of capital that is needed to enter the industry. Society most often simply cannot withstand the second such producer (fixed costs are significant). For these types of activities, the size of an effective enterprise, as a rule, is equal to or as close as possible to 100% of the volume of internal consumption of these goods, which corresponds to just one efficient manufacturer in the industry.
Let us now consider the balance of "pluses" and "minuses" in connection with the existence of spheres of activity, where the number of efficient enterprises is equal to one (the branch of natural monopoly).
"Pros":
1.the ability to maximize the effect of scale of production, which leads to a decrease in production costs product units,
2.the ability to mobilize significant financial resources to maintain the means of production at an appropriate level,
3.the possibility of using the achievements of scientific and technological progress,
4.the ability to follow uniform standards for manufactured products and services provided,
5. the possibility of replacing the market mechanism, that is, the market economic organization, with an intra-firm hierarchy and a system of contractual relations, which will reduce losses associated with risk and uncertainty.
"Minuses":
1.the ability to determine the level of the selling price, create the temptation to shift costs to a large extent to the end consumer, who is not able to exert a reverse influence on the manufacturer,
2.the ability to block technical progress,
3. the ability to "save" by reducing the quality of products and services provided,
4. the ability to take the form of an administrative dictate that replaces the economic mechanism.
It can be seen that the advantages of a natural monopoly become disadvantages and vice versa. This form of economic organization deeply contradictory. We cannot unequivocally determine what outweighs the "pros" or "cons".
However, society cannot live in conditions of such uncertainty, dependence on natural monopolists. The market form of economic organization is not able to overcome or even weaken the negative factors of natural monopoly. Market mechanism resource allocation in in this case does not work.
Society can resolve existing contradictions in only one way - regulation of natural monopoly.
Thus, the question arises: what, in the end, is a natural monopoly - a form of economic organization or a form of social (state) regulation?
The answer to this question will be the subject of the next part of this study.
Similar information.
This paper provides a statistical analysis of the dynamics of the development of natural monopolies in Moscow and St. Petersburg. Socio-economic phenomena of social life are in continuous development. Statistics study their change over time by constructing and analyzing series of dynamics. When studying the series of dynamics, statistics are faced with the following tasks: to characterize the intensity of development of the phenomenon from period to period (from date to date), as well as the average intensity of development for the period under study, to identify the main trend in the development of the phenomenon, to forecast the development for the future, and to study seasonal fluctuations.
A market economy is characterized by the absence of a state monopoly in most markets, but in the Russian Federation, many markets are controlled by non-state monopolies. Any company strives for a monopoly position in the market, since such a position ensures the stability and profitability of the business.
This determined relevance of this work. The purpose work is to study the dynamics of the development of natural monopolies in Moscow in St. Petersburg. The purpose of the work fully determined it tasks:
- Study of the concept of natural monopolies and methods of their regulation
- Study of theoretical approaches to the statistical study of the series of dynamics
- Analysis of the dynamics of the development of natural monopolies in Moscow and St. Petersburg
Theoretical part
Natural monopolies and their regulation
The beginning of economic reforms in Russia was associated with the maximum reduction in the presence of the state in the economic system and an attempt to ensure the functioning of this system only on the basis of self-regulation. The current state of affairs in the Russian economy necessitates a thoroughly thought out and legally formalized state regulation of new economic relations.
Here are the main features of a natural monopoly:
1) the legal basis for the establishment (consolidation), implementation and
termination of the regime.
2) the correlation of legislation on monopolies with the Law “On Competition”, their differentiation by subject and means of legal regulation.
3) the spheres (boundaries) of the monopoly regimes under consideration by industry and type of business, as well as relations to which the legislation on regulated monopolies applies.
4) the general legal status of monopoly entities, the specific nature of their rights and obligations both in the field of relations with third parties and in intra-company processes.
5) a system for regulating the activities of monopoly entities.
6) sanctions and liability for violation of the provisions of the legislation in the specified area 1.
And so now we can give a clear definition of natural monopoly, formulated by the State Duma on July 19, 19995. (Federal Law "On Natural Monopolies")
Natural monopoly is the state of the commodity market, in which the satisfaction of demand in this market is more efficient in the absence of competition due to the technological features of production (due to a significant decrease in production costs per unit of goods as the volume of production increases), and the goods produced by the subjects of natural monopoly are not can be replaced in consumption by other goods, and therefore the demand in a given commodity market for goods produced by the subjects of natural monopolies is less dependent on changes in the price of this good than the demand for other types of goods.
Areas of activity of natural monopolies:
Transportation of oil and oil products by main
Pipelines.
Gas transportation through pipelines.
Electricity and heat transmission services
Rail transportation.
Services of transport terminals, ports, airports.
Public electrical and postal services.
Grounds for establishing a monopoly regime.
A) legal grounds 2.
The monopoly regulatory institutions in question are exceptional. From an economic point of view, exclusivity means removing certain spheres of economic activity from the influence of purely market competitive mechanisms of self-regulation. The establishment of an appropriate monopoly regime means the introduction of a special position in a particular sector of the economy, which is impossible to imagine without any economic and legal grounds. The legal grounds and principles for the use of the legal regime of monopolies should be indicated precisely in a federal legal act, taking into account the restrictive functions of this institution. When preparing such acts, it should be borne in mind that natural monopoly is due to objective economic and technological characteristics of production. The activities of natural monopolies cannot be considered as economic activities prohibited in paragraph 2 of Art. 34 of the Constitution of the Russian Federation. After all, the functioning of a natural monopoly is aimed not at monopolization, but at eliminating unfair competition. It is carried out exclusively within the framework of state regulation of market relations and with the aim of protecting consumers. When characterizing the legal grounds for the monopoly regimes under consideration, it is necessary to take into account their consistency and interconnection with the antimonopoly legislation, the basis for which is the Law “On Competition”. The relations arising in the commodity market of a natural monopoly are complex and specific both in terms of their subjective nature and in their content, and must be regulated by special legislation. It will serve as a limiter for the universal law “On Competition”. The natural monopoly regime has the character of a special exception. However, such exclusivity should have its boundaries, which are determined by the conditions and tasks of the analyzed institution.
b) economic reasons.
Natural monopoly exists when economies of scale are so great that one firm can supply an entire market at lower unit costs than a number of competing firms would have. Such conditions are typical for public utilities. In these cases, the economies of scale in the production and distribution of the product are so great that large-scale activities are required to obtain low unit costs and low prices. This can be clearly seen from the graph. As the volume of production increases significantly, long-term average costs fall 3
Figure 1 (long run average cost)
If the market were divided among many producers, economies of scale would not be achieved, unit costs would be high, and high prices would be required to cover these costs. As possible means of ensuring socially acceptable behavior on the part of a natural monopoly, two alternatives are presented. One is state ownership and the other is state regulation. If competition is not possible, then regulated monopolies need to be created to avoid possible abuse of uncontrolled monopoly power 4.
Picture 2
Most monopoly industries are natural monopolies and are therefore subject to social regulation. In particular, the prices and tariffs that may be assigned by utilities - railways, telephone companies, natural gas and electricity suppliers are determined by federal and local regulatory commissions or departments. Figure 2 shows the demand and cost parameters of a natural monopoly. Because of the high fixed costs, the demand curve crosses the average cost curve at a point where the average cost falls further. Obviously, it would be inappropriate to have a number of firms in such an industry because, by dividing the market, each firm would move further to the left on its average cost curve, so that unit costs would be much higher. The relationship between market demand and costs is such that achieving low unit costs permits one producer.
We know, applying the rule mr = mc, that P and q are the profit-maximizing price and output that an unregulated monopolist would choose. Since the price is higher than the average gross cost, the monopolist has a significant economic profit, which is likely to contribute to income inequality. Moreover, the price exceeds the marginal cost, which indicates an underutilization of the resources of that product or service. The question is whether government regulation can bring about better results from a societal point of view. The aim of the regulator is to achieve efficiency in the allocation of resources, for this it should try to establish by law a (maximum) price for the monopolist, which is equal to the marginal cost. An important point is that at a given legally established price P, the monopolist will maximize profits or minimize losses by producing q units of output, because it is with this output that mr (p) = mc. This price, at which the efficiency of resource allocation is achieved, is called the socially optimal price. But the socially optimal price P will raise the question of the loss to the regulated firm. It is likely that a price that equals marginal cost will be so low that average gross costs are not covered, as shown in the figure. The inevitable result is loss. Therefore, to impose a socially optimal price on a regulated monopolist would mean losses in the short run, and in the long run - bankruptcy. In this case, the regulator can act according to several scenarios. One option would be a subsidy sufficient to cover the loss that marginal cost pricing would entail. For example, in the US, the regulator sets a “fair return” price. Keeping in mind that gross average cost includes normal or “fair profit, we see that the price providing fair profit” in the figure would be P, where price equals average cost. Since the demand curve intersects the average cost only at point f, it is clear that P is the only price that yields a fair profit. The corresponding output at the regulated price P would be q.
Natural monopoly entity - an economic entity (legal entity) engaged in the production (sale) of goods under conditions of natural monopoly 5.
World and Russian practice shows that the impact on the monopoly should be carried out by the state. For this, as we have already said, one can use state property (enterprises where the state has a controlling stake) or special regulatory bodies of different levels and competencies. In Russia, most likely, a combination of the above options will be used. So, in accordance with The state program privatization of state and municipal enterprises in the Russian Federation there are objects and enterprises that are in federal ownership, the privatization of which is either prohibited at all, or is carried out by decision of the government of the Russian Federation or the State Property Committee of Russia, taking into account the opinion of sectoral ministries and departments, which include, for example, railways, enterprises and associations fuel and energy complex, enterprises for the production, bottling and packaging of alcohol, alcoholic beverages. It is easy to see that these areas are related to those that are subject to state and natural monopolies. Consequently, enterprises based on the state participation are the obvious basis for the analyzed monopoly institutions. Hence follows the desire of the legislator to strengthen the manageability, including of federal state enterprises. Russian legislation does not prohibit the organization of state-owned enterprises as subjects of regulated monopolies. Thus, the characteristics of the subjects of regulated monopolies include both the fact that these subjects operate in conditions of state or natural monopoly, and in what organizational and legal forms they are created and what property they are endowed with.
Obligations of subjects of natural monopolies.
Natural monopoly entities shall not have the right to refuse to conclude an agreement with individual consumers for the production (sale) of goods in respect of which regulation is applied in accordance with federal law, if the natural monopoly entity has the opportunity to produce (sell) such goods.
In a situation of strong monopolization of the economy, the state is forced to exercise control over the activities of natural monopolies. Natural monopoly industries have a high economic efficiency, That is the main reason the need to regulate their activities.
State control consists in the ownership controlling stake shares and in special antimonopoly legislation that defines methods of regulation and control of natural monopoly sectors, consumers subject to preferential or mandatory service.
State regulation is applied primarily in public sectors: communications, gas, electricity, water supply. Enterprises are subject to regulation in which:
A large part of their business consists of services aimed at a wide range of consumers;
Funding comes with huge amounts of money;
Business development affects the improvement of social welfare and industrial development in a particular area.
There are three ways to regulate natural monopolies:
1. Direct government regulation.
The essence of such regulation is determined, as a rule, by special legislative acts... For example, The federal law"On Natural Monopolies" dated August 17, 1995. It defines the industries that are classified as natural monopolies and the regulations for their regulation.
There are several problems with this regulation. First, there is a need to create an organ state control over the activities of natural monopoly. In this case, there is a danger that not the public interests will be taken into account, but, first of all, the interests of the ruling groups. Second, it is difficult to accurately determine the production costs of a producer of goods from the natural monopoly industries. And this is a necessary part of the regulation.
2. Bidding for Usability and Effectiveness in Different Conditions.
This method of regulating natural monopoly is associated with the use of the mechanism of economic organization. This is an auction for a franchise, that is, an auction for the right to conduct such an activity. In this case, the shortcomings of not the economic, but the administrative system appear. With this method of regulation, a contract is concluded with the manufacturer, which offers the best conditions.
3. Price discrimination.
This method is used as natural monopolies themselves, in order to increase net income and the subjects regulating them in order to reduce the negative effect of monopolies. This is the sale of goods by different prices different buyers... The main condition for price discrimination is the impossibility of resale of goods. Price discrimination is divided into three categories depending on the method of implementation:
1. First degree.
This is the sale of each unit of the good at the price of its demand. In this case, the demand curve for the monopolist becomes the marginal revenue curve. It is extremely rare to carry out discrimination of this degree.
2. Second degree.
The monopolist sells not every unit of the good, but certain lots of it at different prices.
3. Third degree.
Only if the sectoral demand is presented in the form of separate groups of consumers with different demand functions.
Natural monopolies very often use price discrimination in regulation.
According to the Law on Natural Monopolies, there are two methods of regulating natural monopolies:
1. Price regulation.
Its essence lies in the determination and establishment of fixed prices for goods and services, or their marginal level, or marginal coefficients of change in prices for goods of the branches of natural monopolies. This procedure is enshrined in special regulations.
There are several methods of price regulation:
· Marginal cost method.
The state controls that the price set by the monopolist is equal to the marginal cost. This ensures efficient production and consumption of products.
· Average cost method.
The price should be equal to the average cost. With this method, less goods can be produced than should be for an efficient economy as a whole. On the other hand, the monopolist knows in advance that all his expenses will be compensated, that is, there is no need to minimize costs.
· Price cap method.
This method usually results in a shortage of products.
· Subsidizing natural monopolies.
It is a method of price discrimination, whereby some consumers receive products at lower prices at the expense of others who pay more.
It turns out that industrial enterprises subsidize tariffs for the population.
2. Non-price regulation.
The essence consists in identifying consumers who need services, establishing the level of their provision, taking into account the need to protect the rights and interests of citizens, ensure the security of the state, protect nature and cultural values. The resources that are needed in the production of any product are limited and sometimes completely depleted. This allows you to selectively sell products to different consumers. The state intervenes to protect the interests of all consumers.
Which method to use in regulation is determined by the regulator of natural monopolies. This decision is taken after careful analysis of the specific regulated entity.
To public policy in the spheres of activity of subjects of natural monopolies was the most effective, state control is necessary:
1. Preliminary control.
This is a mandatory submission of an application for consent to the conclusion of any transactions, as well as the submission of other necessary information to the relevant authorities.
2. Follow-up control.
This is a mandatory notification of the body regulating the natural monopoly about the actions performed on the subject of the monopoly.
The subjects of natural monopolies are in a special position. Hence, it became necessary to limit them economic activity... Natural monopoly entities do not have the right to refuse to conclude contracts with individual consumers for the production of goods, if they have the ability to produce such goods. Subjects of natural monopolies are obliged to provide access to markets for goods and services, to produce goods and services, regulated by law"On natural monopolies". They are also required to provide reports on their work and draft investment plans.
