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Global versus Local Competition

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  • Legros, Patrick
  • Stahl, Konrad O.

Abstract

We analyse the impact of increased outside opportunities brought to consumers by access to a global market on local market performance under monopoly versus oligopoly. If consumers have to choose once where to shop we show that under all forms of organizing the local market, increased competition from the global market will crowd out variety in the local one. The effect of increased global competition on prices is much less clear. While it yields a price reduction under monopoly, prices may increase under oligopoly. We check the robustness of these results in various extensions and draw consequences on competition and industrial policies.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3333.

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Date of creation: Apr 2002
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Handle: RePEc:cpr:ceprdp:3333

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Related research

Keywords: information; monopoly; oligopoly; product quality;

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  1. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  2. Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
  3. S. P. Anderson & A. de Palma, 1997. "From local to global competition," THEMA Working Papers 97-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
  5. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
  6. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
  7. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1997. "Corporate governance, competition policy and industrial policy," ULB Institutional Repository 2013/9613, ULB -- Universite Libre de Bruxelles.
  8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  9. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
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