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Competition policy and market leaders

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  • Zigic, Kresimir
  • Maçi, Ilir

Abstract

We study the potential loss in social welfare and changes in incentives to invest in R&D that result when the market leading firm is deprived of its position. We show that under plausible assumptions like free entry or repeated market interactions there is a social value of market leadership and its mechanical removal by means of competition policy is likely to be harmful for society.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 3 (May)
Pages: 1042-1049

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1042-1049

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Market leaders Competition policy Innovation K21 L11 L13 L16;

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References

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  1. Damme, E.E.C. van & Hurkens, S., 1998. "Endogenous Stackelberg leadership," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80496, Tilburg University.
  2. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  3. Dirk Czarnitzki & Federico Etro & Kornelius Kraft, 2009. "The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence," Working Papers 163, University of Milano-Bicocca, Department of Economics, revised May 2009.
  4. Gilbert, Richard & Katz, Michael, 2001. "An Economist's Guide to U.S. v Microsoft," Competition Policy Center, Working Paper Series qt7kj1x7g9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  5. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  6. Boone, Jan, 2004. "Balance of Power," CEPR Discussion Papers 4733, C.E.P.R. Discussion Papers.
  7. John Vickers, 2009. "Competition Policy and Property Rights," Antitrust Chronicle, Competition Policy International, vol. 6.
  8. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
  9. Syropoulos, Constantinos, 1996. "Nontariff Trade Controls and Leader-Follower Relations in International Competition," Economica, London School of Economics and Political Science, vol. 63(252), pages 633-48, November.
  10. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
  11. Michael D. Whinston, 2001. "Exclusivity and Tying in U.S. v. Microsoft: What We Know, and Don't Know," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 63-80, Spring.
  12. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  13. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  14. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  15. Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 147-56, June.
  16. Benjamin Klein, 2001. "The Microsoft Case: What Can a Dominant Firm Do to Defend Its Market Position?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 45-62, Spring.
  17. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
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Cited by:
  1. Federico Etro & Dirk Czarnitzki & Kornelius Kraft, 2011. "Endogenous Market Structures and Innovation by Leaders: an Empirical Test," Working Papers 2011_04, Department of Economics, University of Venice "Ca' Foscari".

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