Regulated market

A regulated market (RM) or controlled market is an idealized system where the government or other organizations oversee the market, control the forces of supply and demand, and to some extent regulate the market actions. This can include tasks such as determining who is allowed to enter the market and/or what prices may be charged.[1] The majority of financial markets such as stock exchanges are regulated, whereas over-the-counter markets are usually not at all or only moderately regulated.[2]

One of the reasons for regulation can be the importance of the regulated activity - meaning the harm suffered should the industry fail would be so fatal that regulators (governments, legislators) cannot afford the risk. This includes fields like banking or financial services. Secondly, it is common for some markets to be regulated under the claim that they are natural monopolies, or that a monopoly would very likely appear should there be no regulation. It is crucial to prevent misuse of monopoly power, as this can lead to delivery of poor services with very high prices. This includes for example the telecommunications, water, gas, or electricity supply.[1][2] Often, regulated markets are established during the partial privatisation of government controlled utility assets.

A variety of forms of regulations exist in a regulated market. These include controls, oversights, anti-discrimination, environmental protection, taxation, and labor laws.[1]

In a regulated market, the government regulatory agency may legislate regulations that privilege special interests, known as regulatory capture.[1]


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