Question

describe for me MacAvoy's analysis and conclusions regarding the natural gas pipeline industry and the electricity transmission industry

Answer 1

MacAvoy's analysis states that interchange markets have been highly concentrated in pipeline and natural gas industry. Secondly tacit collusion and non competitive pricing is largely observed. Thirdly price cost margins have increased substantially despite of stabilisation in market. Also government efforts to fix prices or restrict prices for consumer's benefits have resulted in decline of supply base, market imbalance and industrial dysfunction and large scale shortages in 1970.

By this he concludes that government regulations to set prices hasnot been effective either for consumers or industrial rivals. He concludes that well regulated regume is no match for unregulated and truly competitive market for maintaining supply demand balance.