Antitrust Policy: To Intervene or To Not Intervene—That Is the Question

Discusses the competition between natural monopolies and the antitrust policy implications when a natural monopoly is a contestable natural monopoly and when the natural monopoly is non contestable. The policy recommendation is that if the natural monopoly is a contestable monopoly, then, even when the natural monopoly is charging prices significantly higher than they could have charged if there were competitors, regulators need not intervene. The market, left to itself, will eventually give the desired outcome. If the natural monopoly is not a contestable monopoly, and the natural monopolist is charging prices much higher than could have been charged if there were competitors, then the antitrust regulators must intervene. They could, for example, regulate the natural monopoly in a manner similar to how public utilities are regulated.