Research On Government Regulation Of Natural Monopoly Industry

Regulation reform of Natural Monopoly industries is not only the most active research projects in the economic sphere but also a hot issue of China's current economic reform. This paper on the reform of Natural Monopoly regulated industry conducted a more in-depth exploration. Set China's telecommunication industry as an example, the boundary of natural monopoly and government regulation on this industry is redefined only to find a way conforming to the needs of natural monopoly market structure change and responsive to the needs and ideas of effective governance. Thus, the further development of the natural monopoly industries will be promoted so as to improve the international competitiveness of China's telecommunication industry.This article, starting from the analysis of the theoretical foundation and conclusions on natural monopoly industries and government regulation, discussed and summarized the characteristics of the natural monopoly industries and monopoly causes. And then it proved that the characteristics will inevitably lead to failure of the market mechanism and the formation of monopolies. It is proved by graphics and formula that monopolizes the market will inevitably bring about the loss of social welfare, so the government regulation is necessary and effective. As to the analysis on tools of the regulation, the traditional and the western developed countries' methods are firstly outlined and compared. After that, a new contestable market theory is raised. It is compared and analyzed with the traditional theory. After the elaboration of the development and standard about workable competition theory, it is identified that the workable competition is one that the competition returns exceeds the competition cost. Thus it is appropriate and meets the requirements of the economy of scale. Meantime, the application prospects and results of the core content of the theory in natural monopoly industries are forecasted, providing a theory foundation to the next step on empirical analysis. Then, take the case of China telecommunication industry, summarize government regulation and existent problem of telecommunication industry, analyze the feasibility about workable competition theory of government regulation of telecommunication industry. Last, put forward some strategies and suggestions about it.