ABSTRACT
One key attribute of many infrastructure industries is that they have the characteristics of a natural monopoly, so that the costs of provision are minimized with only one supplier in the market. One aspect of the policy problem is that the provider may abuse their monopoly power by restricting the quantity or quality of the monopoly output and pricing above cost. The monopolist may also have insufficient incentive to keep costs as low as possible. Finally, the monopolist may use control of the bottleneck facility to thwart competition in upstream or downstream markets. This section canvasses possible policy responses to these problems.1
