Please note the prerequisites for this course at the bottom of the course description.|
In many markets, the government aims at safeguarding specific public interests. In some of these cases, this happens through public participation in the market. For example, in the media market, governments are active as players, through producing or subsidizing public broadcasting. Another example is gambling, in which governments may own and operate casinos and lotteries. Typically, in such markets, public providers compete with private companies. A history of exclusive licenses and legislation may have created stakeholders with vested interests in the status quo, such as the public providers themselves, organisations receiving proceeds from public providers' revenues, and the government receiving proceeds from revenues. The presence of these stakeholders, and claims about "public interests" that they may make, can easily cloud assessments of the efficiency of such markets.
In general, public policy that is based on private, vested interests tends to reduce the aggregate welfare level, and may actually undermine public interests. One reason is that public policy, by implicitly aiming at safeguarding private rather than public interests, may lead to a distortion of the playing field between public and private providers. To analyze such markets, we will discuss the concept of "public interests", relate it to underlying market failures, discuss the risk of government failures in case of public intervention, and study the nature of competition between public and private providers who may be subject to different rules. During the course, we will try to distinguish between valid arguments for intervention versus the improper use of "public interest" arguments to obtain private goals; study a couple of cases in detail, such as public broadcasting and gambling. The course will use ingredients from the theories of welfare economics, industrial organisation and competition economics, combined with institutional aspects such as specific legislation and regulation.
At the end of the course the student is able to:
• Apply economic theories of "mixed oligopoly" to gain understanding into markets in which public and private providers compete with each other.
• Relate public policy and competition policy problems to policy-making processes, political choices and vested interests;
• Understand how political preferences and vested interests may distort the design and implementation of public policy;
• Understand different types of rationales for, and shortcomings of, government intervention in markets;
• Critically assess the legitimacy of statements made in policy debates (e.g. by politicians, parties with vested interests);
• Understand the design and implementation of economic policy in the light of the process of public policymaking;
• Relate the theory of competition policy to a wider political and societal context.
Lectures, seminars (including guest lectures), student presentations.
• Written exam (70%, individual);
• Paper and presentation (30%, small groups)
• Intermediate microeconomics (e.g. familiarity with concepts such as market structure, market power, monopoly, Bertrand versus Cournot competition, entry barriers, product differentiation).
• Ability to calculate/derive Nash equilibria in simple game-theoretic models of competition, and to interpret the outcomes (e.g. simultaneously solving first-order conditions for profit maximization, performing comparative statics based on findings).
• It is assumed that students are familiar with the concept of market failure (and its various appearances, e.g. monopoly power, asymmetric information, public goods, transaction costs) as a rationale for government intervention. Students without such a background will be able to catch up by reading a background paper, if necessary.
In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. Please note that access codes are not re-usable meaning that codes from second hand books do not work, as well as access codes from books with a different ISBN number. Separate or spare codes are usually not available.
|You must meet the following requirements|
- Enrolled for a degree programme of faculty Faculty of Law, Economics and Governance
|C. Wolf Jr (1979), "A Theory of Nonmarket Failure: Framework for Implementation Analysis", Journal of Law and Economics 22(1), 107-139.|
|Academic articles and papers on "mixed oligopoly", all available from the library/internet. A set of approx. 5 papers will be announced at the start of the course.|
|Policy documents and legislation regarding the cases that will be studies in the course, such as public broadcasting and gambling, and regarding state aid. T.b.a.|
|Materials on the policy-making process, based on J.E. Anderson (2015), Public Policymaking; F. Fischer, G.J. Miller and M.S. Sidney (2007), Handbook of Public Policy Analysis: Theory, Politics, and Methods.|
|Lecture slides (to be distributed via Blackboard during the course)|
|Paper and presentation|