The Economics of Scale and Scope in Natural Monopolistic Industry and the Reform on Management System

Although the natural monopolistic industry is obviously characterized by its Economics of Scale and Economics of Scope, the monopoly will also lead to production-inefficiency, welfare-loss, management-inefficiency and innovation-stagnation, etc. So it is necessary to carve up the natural monopoly operation from non-natural monopoly operation of the natural monopolistic industry, to introduce competition into non-natural monopoly operation, and break the administrative monopoly. Following the principle of gradual reforming, the monopoly-structure and monopoly-conduct should be differentiated correctly. The other management reforms on natural monopolistic industry can benefit from the success in the management reform of Chinese railway transportation industry.