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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. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
  2. 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.
  3. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  4. Richard J. Gilbert and Michael L. Katz., 2001. "An Economist's Guide to U.S. v. Microsoft," Economics Working Papers E01-300, University of California at Berkeley.
  5. 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.
  6. Boone, Jan, 2002. "'Be Nice, Unless it Pays to Fight': A New Theory of Price Determination with Implications for Competition Policy," CEPR Discussion Papers 3342, C.E.P.R. Discussion Papers.
  7. Boone, J., 2004. "Balance of Power," Discussion Paper 2004-104, Tilburg University, Center for Economic Research.
  8. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, Junio.
  9. Deneckere, R. & Kovenock, D. & Lee, R.E., 1988. "A Model of Price Leadership Based on Consumer Loyalty," Purdue University Economics Working Papers 947, Purdue University, Department of Economics.
  10. John Vickers, 2009. "Competition Policy and Property Rights," Antitrust Chronicle, Competition Policy International, vol. 6.
  11. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007.
  12. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  13. 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.
  14. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, Junio.
  15. 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.
  16. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
  17. 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.
  18. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  19. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
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