What are the options available for government in regulating the pricing behaviour of a monopolist?

Question

What are the options available for government in regulating the pricing behaviour of a monopolist?

Answer 1

Depends on the nature of the monopoly and of the government.

Some governments have just nationalized the monopolies., though usually not with the goal of regulating price behavior, but of getting at the loot the high prices bring.

http://en.wikipedia.org/wiki/Nationaliza...

In the case of legal monopolies, various utilities in the United States have been, at various times, controlled by carious public agencies. It used to be that local phone charges, residential electricity and gas charges, etc. were all set by regulatory commissions.

http://www.cato.org/pubs/regulation/reg1...

http://en.wikipedia.org/wiki/American_Te...

http://papers.ssrn.com/sol3/papers.cfm?a...

Then there are patents. Brazil coerced several drug companies into lowering prices on certain drugs by threatening to produce generic versions of those drugs.

http://www.msnbc.msn.com/id/18490388/

http://www.twnside.org.sg/title2/intelle...

Several countries, including the U.S., have, at various times (most often during a war), forced patent holders to license their patents for others to use.

http://www.ietf.org/mail-archive/web/ipr...

http://www.concurrences.com/article_revu...

http://www.pubmedcentral.nih.gov/article...

And there are various other kinds of constraints: export restrictions to reduce demand and hence prices within the country; informal pressure in the form the threats to apply the law stringently; etc.

But most of the time, monopolists are rich and have money with which to bribe politicians and government employees so they rarely get regulated all that heavily.

For example, utility regulation was all about "cost plus" which means the more a utility spent, the more it was allowed to charge and hence the higher its profits.