There are two reasons why the pattern of regulation and the
pattern of private cartelization are different. First, the
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demand for regulation (derived from its value in enhancing
the profits of the regulated firms) is greater among industries
for which private cartelization is an unfeasible or very costly
alternative——industries that lack high concentration and other
characteristics favorable to cartelizing. They lack good substitutes
for regulation. (This point suggests, incidentally, a
testable——in principle anyway——hypothesis of the economic theory
of regulation: among randomly selected unconcentrated industries
the presence of cartel—like regulation will be negatively related
to the price elasticity of demand for the industry's product
at the competitive price. The qualification is critical,
and makes the test difficult to carry out in practice.)