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

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Date of creation: Nov 2008
Date of revision:
Handle: RePEc:cer:papers:wp375
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  1. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  2. 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).
  3. 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.
  4. van Damme, E.E.C. & Hurkens, J.P.M., 1996. "Endogenous Stackelberg Leadership," Discussion Paper 1996-115, Tilburg University, Center for Economic Research.
  5. 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.
  6. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  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. Boone, J., 2004. "Balance of Power," Discussion Paper 2004-104, Tilburg University, Center for Economic Research.
  9. John Vickers, 2009. "Competition Policy and Property Rights," Antitrust Chronicle, Competition Policy International, vol. 6.
  10. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  11. 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.
  12. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  13. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  14. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  15. 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.
  16. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  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. 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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