Analysis on Weaknesses of the Theory of Natural Monopoly and Corresponding Revelations
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Abstract:
Natural monopoly is characterized by economies of scale and production cost subadditivity in the traditional and new theory of natural monopoly.The paper thinks that they are incorrect in the method of judging some industry as natural monopoly.They neglect some important transaction(system) cost factors.Once giving up the old analytic framework, the authors find that economies of scale and production cost subadditivity are neither necessary nor sufficient for natural monopoly.Based on the analysis on weaknesses of the traditional and new theory of natural monopoly,the paper discusses the essential character of natural monopoly and educes some corresponding revelations about the reform of network industries.
