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Competition policy and market leaders

  • Zigic, Kresimir
  • Maçi, Ilir

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Jan Boone, 2002. "’Be nice, unless it pays to fight’: A New Theory of Price Determination with Implications for Competition Policy," CIG Working Papers FS IV 02-18, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  2. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  3. Czarnitzki, Dirk & Etro, Federico Gabriele & Kraft, Kornelius, 2008. "The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence," ZEW Discussion Papers 08-078, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Boone, Jan, 2004. "Balance of Power," CEPR Discussion Papers 4733, C.E.P.R. Discussion Papers.
  5. 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.
  6. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  7. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  8. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  9. 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.
  10. John Vickers, 2010. "Competition Policy and Property Rights," Economic Journal, Royal Economic Society, vol. 120(544), pages 375-392, 05.
  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. 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.
  13. Eric van Damme & Sjaak Hurkens, 1996. "Endogenous Stackelberg leadership," Economics Working Papers 190, Department of Economics and Business, Universitat Pompeu Fabra.
  14. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  15. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
  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. 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.
  18. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  19. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
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