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Competition Policy and Market Leaders

  • Ilir Maçi
  • Kresimir Zigic

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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File URL: http://www.cerge-ei.cz/pdf/wp/Wp375.pdf
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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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  1. 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.
  2. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  3. Boone, J., 2004. "Balance of power," Discussion Paper 2004-021, Tilburg University, Tilburg Law and Economic Center.
  4. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
  5. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  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. 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. John Vickers, 2010. "Competition Policy and Property Rights," Economic Journal, Royal Economic Society, vol. 120(544), pages 375-392, 05.
  9. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007.
  10. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  11. 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.
  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. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  14. repec:ner:tilbur:urn:nbn:nl:ui:12-154410 is not listed on IDEAS
  15. 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.
  16. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  17. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  18. 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.
  19. repec:dgr:kubtil:2004021 is not listed on IDEAS
  20. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  21. repec:dgr:kubcen:2004104 is not listed on IDEAS
  22. 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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