POSC 182 Lecture 21 2010

POSC 182 Lecture 21 2010 - POSC 182: Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 3: Policy Tools and Divergent Economic Philosophies Lecture 21: Regulation February 24, 2010 1 Q1
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Advantages of Markets Markets can allocate goods, services, capital and labor efficiently between those who supply it and those who demand it. In contrast, when governments try to make such decisions, they may have high costs and may be ill- informed Markets can create incentives to work hard, be productive, and to innovate Markets work best with: Property rights and contract enforcement Complete information Greater competition (except for natural monopolies) 2
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Market Failure Market Failure : When markets by themselves are unable to correct for over- or under-supply of goods or services. Types of Market Failures: Lack of Competition Monopoly Standard Oil Company controlled over 90% of oil by the early 1900s by constricting the use of oil pipes – Microsoft Windows (Microsoft must allow choice of web browsers in Europe) Unequal Bargaining Power
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POSC 182 Lecture 21 2010 - POSC 182: Politics and Economic...

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