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Competition Policy and Market Leaders

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  • Ilir Maçi
  • Kresimir Zigic

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

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp375.

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Date of creation: Nov 2008
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Handle: RePEc:cer:papers:wp375

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Keywords: Market leaders; Competition policy; Innovation.;

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References

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  1. Damme, E.E.C. van & Hurkens, J.P.M., 1999. "Endogenous Stackelberg leadership," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154410, Tilburg University.
  2. 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.
  3. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  4. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  5. Boone, J., 2004. "Balance of Power," Discussion Paper 2004-104, Tilburg University, Center for Economic Research.
  6. 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.
  7. 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.
  8. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  9. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
  10. John Vickers, 2009. "Competition Policy and Property Rights," Economics Series Working Papers 436, University of Oxford, Department of Economics.
  11. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  12. Gilbert, Richard J & Katz, Michael, 2001. "An Economist's Guide to U.S. v. Microsoft," Department of Economics, Working Paper Series qt56f8p06q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  13. 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.
  14. 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.
  15. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  16. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
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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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