Definition
- Price cap regulation
- Price cap regulation is where a regulator sets the price that a firm with market power can charge over the next few years.
- Not to be confused with: Competition policy
- Competition policy is the body of law that promotes competition between firms, including the power to block certain mergers and, in some cases, to break up large firms.
Test yourself
What is the difference between price cap regulation and competition policy?
Competition policy tries to create or protect rivalry; a price cap accepts a firm's market power and limits what it can charge.