The Assessment: Recent Developments in Industrial Economics and their Implications for Policy

In broad terms, recent theory suggests that the increased emphasis that has been placed in many countries on "market forces' may be misplaced. The failure of competition to establish desirable outcomes provides a prima facie case for government intervention. At the same time, it has become clear that diagnosing instances of competitive failure is not straightforward and the determination of appropriate remedies requires detailed analysis. Blanket intervention by means of taxes, regulation and rules to guide competition policy may do more harm than good. This Assessment describes some of these recent theoretical developments and applies the analysis to important areas of policy.