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• Natural monopolies in the 'old economy'

  • Natural monopoly
  • Technical and organizational inseparability of different activities in the value chain: integrated firms
  • Little data/information available
  • Specific, large-scale technology
  • Positive external effects    

• Three reasons for moving towards the ‘New Economy’ (Glachant)

  1.The object of regulation changed
  

  • Sectors have been exposed to new competitive dynamics that have revolutionized their industrial framework, technology and interactions with users
    

  2.Different rules & regulations
  

  • Changes in what regulation is feasible; information society based on creating knowledge; old 19th regulatory model does not capture the essential.
    

  3.Different processes of regulation
  

  • Regulations have become more responsive than before
    

• What are the four fundamentals of the ‘New Economy’ (Glachant)?

  1. Internet Decade; information is crucial
     
  2. New society: democracy of opinion and lobbies
     
  3. Growth is propelled by innovation and knowledge-based creations
     
  4. Processes are organized into interacting blocks; modules and interfaces (seperability, coordination) (Mass customization (modules/interfaces) instead of mass production (Fordism) )

• In the new economy, a decline in information cost (by new ICT) solves three issues. Name and explain them.

  -Externalities: you now have data to find who takes profit from infrastructures and in what way. Charging users.
  -Inseparability: you can separate different parts of infrastructures in different kinds of production process with these new ICT technologies
  -Monitoring: who is making use of what services in infrastructures. Also offer the opportunity to charge prices on basis of usage.

• Institutional models of railways in Europe (FINGER p.4)

  1.Complete separation (Swedish model)
  2.Holding company (German model)
  3.Separation of key powers (French model)

• In article of Glachant: Three different approaches to the regulation of infrastructures in public administration.

  • “Opening up” of operators&agents along the value chain, creating interfaces&codes, connecting modules. Facilitating Interconnectivity

  
  

  • Organizing forums to understand interpret and influence the creation of such interfaces and codes. Knowledge on new tech is needed.

  
  

  • Creating a new viable regulatory mix combining ‘the wealth of information’ with the ‘dearth of comprehension’. So we have too much information which is difficult to digest. How can we make some sense full regulation out of it?
    

• What is the meaning of ‘unbundling’ of infrastructures and how is that related to the technological and institutional transformation of infrastructures in the ‘new economy’? (5 points)

  -Unbundling refers to the institutional separation of technical processes.
  -Unbundling allows for a different regulation of such complex socio-technical systems. The networks can be regulated as natural monopolies, whereas the commercial activities could be coordinated by market based coordination mechanisms.

• How to provide suitable economic incentives? And this has consequences for?

  Providing suitable economic incentives by allocating property rights and decision rights
  

  • With consequences for:
    

  1. Allocation of economic risks
     
  2. Allocation of costs and benefits
     
  3. Monitoring and control
     
  4. Economic Efficiency

• Give three reasons why Market Design is needed?

  • Discussions about sector (re)regulation usually end up as a compromise between ideological driven promotors and contestants..
    
  • Because of the fact that market failures are dominant in Networks
    
  • New modes of organization derive from new technological paradigms. These new modes of organisation need new rules.
    

• Give Williamson’s Four Layers of Institution

  
  1. Embeddedness:
  

  • Informal institutions, customs, traditions, norms, religion
    
  • Noncalculative, spontaneous
    
  • Frequency 100 to 1000
    

  2. Intitutional Environment:
  

  • Formal rules of the game (property, polity, judiciary, bureaucracy)
    
  • Get  institutional environment right. 1^st order economizing
    
  • Frequency 10 to 100
    

  3. Governance:
  

  • Play of the game, contracts, transaction theory (aligning governance structures with transactions)
    
  • Get governance structure right 2^nd order
    
  • Frequency 1 to 10
    

  4. Resource Allocation and Employment:
  

  • (prices and quantities, incentive alignment)
    
  • Get marginal conditions right, 3^rd order
    
  •  Frequency: continuous