Bachelor of Science, Business Management
The scope of this paper is to break down and define social regulation, industrial regulation, and natural monopolies by explaining how they have impacted society and why they exist. It is also the intent to summarize the Antitrust Laws, explain the major functions of the five primary federal regulatory commissions that govern social regulation, and identify three main regulatory commissions of industrial regulation.
Industrial Regulation is a type of regulation where the government concerns itself with public services such as public utilities and how much the consumers are charged by companies for the services provided. Industrial regulation is very important and was created to serve in the public's interest. Industrial regulation exists to moderate public services and govern control over prices for those services. “Industrial regulation comes from the theory of regulation of public interest which states that a natural monopoly must be regulated in order to prevent it from becoming a regular monopoly that charges monopoly prices, which harms society and consumers”(William D. Cohan, March 2011).
Industrial regulation affects the market by decreasing efficiency and increasing, as well as provoking monopoly. An unregulated firm as it increases its output is always seeking to reduce its operating costs because this increases the firms take home profit. Requiring the firm to lower its prices the regulatory commission will eventually require an industrial regulated firm to do the same thing because the firm's operational costs are substantially lower. An industrial regulated firm won't be able to increase its profits by decreasing its operating cost. Therefore operational costs to consumers can be passed on by the firms. Industrial regulation often causes natural monopolies to exist much longer than necessary.
Public services that firms provide like electricity and water,
References: William D. Cohan (March 2011), "A Conspiracy with a Silver Lining" The New York Times.