Authors: Jonathan Teubner
The Australian gas market has been described as in crisis. Government reviews have been from within the neo-classical industrial organization (IO) economic paradigm that has underpinned Australian competition policy since Hilmer and focus on efficiency derived from competition. This paper juxtaposes the IO with an alternative framework, the New Institutional Economics (NIE), where efficiency derives from the contractual arrangements between parties because of its relevance in situations of high asset specificity and attendant high switching costs, such as gas pipelines. This paper analyses the operation of the sector, the policy recommendations that have arisen and industry’s responses to highlight that the NIE is the framework that provides the better, more useful insights. Industry’s responses would be more powerful if placed in that framework.
Keywords: industrial organisation, New Instititutional Economics, Gas Transmission, competition poliyc, efficiency