Deregulation

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  • Deregulation
    • Removing government legislation and laws in a particular market.
      • Often removing barriers to competition.
    • Often accompanied with privatisation
    • Advantages
      • Increased competition acts as a spur to greater efficiency, leading to lower costs and prices for consumers
      • Increased number of firms, allowing lower prices for consumers, particularly with low-cost airlines and falling prices of telephone calls.
      • Reduces beaucracy
      • Greater consumer choice
    • Disadvantages
      • It can be difficult to create effective competition in an industry which is a natural monopoly – high barriers to entry. Deregulation may create a private firm with monopoly power.
      • In the local bus market, deregulation often led to duplication of services and the problem of congestion.
      • New private firms will seek to cherry-pick the most profitable routes and times and leave out the unprofitable off-peak services.
      • Private firms may seek to maximise profits instead of consumer welfare
      • Deregulation in train services led to the process of franchising where companies were awarded contracts for a particular time period. There is competition in the bidding process but no guarantee firms will live up to their promises. The government had to take over a failing private firm on a number of occasions.

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