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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 - Economics 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. Boone, Jan, 2004. "Balance of Power," CEPR Discussion Papers 4733, C.E.P.R. Discussion Papers.
  2. 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.
  3. 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.
  4. John Vickers, 2010. "Competition Policy and Property Rights," Economic Journal, Royal Economic Society, vol. 120(544), pages 375-392, 05.
  5. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  6. 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.
  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. 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.
  10. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
  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. van Damme, E.E.C. & Hurkens, S., 1998. "Endogenous Stackelberg leadership," Other publications TiSEM fc1a6ca3-d618-4bc5-a115-f, Tilburg University, School of Economics and Management.
  13. 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.
  14. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
  15. 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.
  16. 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.
  17. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  18. Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
  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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