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Global versus Local Competition

Author

Listed:
  • Legros, Patrick
  • Stahl, Konrad

Abstract

We analyse the impact of increased outside opportunities brought to consumers by access to a global market on local market performance under monopoly versus oligopoly. If consumers have to choose once where to shop we show that under all forms of organizing the local market, increased competition from the global market will crowd out variety in the local one. The effect of increased global competition on prices is much less clear. While it yields a price reduction under monopoly, prices may increase under oligopoly. We check the robustness of these results in various extensions and draw consequences on competition and industrial policies.

Suggested Citation

  • Legros, Patrick & Stahl, Konrad, 2002. "Global versus Local Competition," CEPR Discussion Papers 3333, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3333
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    References listed on IDEAS

    as
    1. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
    2. Anderson, Simon P. & de Palma, Andre, 2000. "From local to global competition," European Economic Review, Elsevier, vol. 44(3), pages 423-448, March.
    3. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
    4. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 825-852.
    5. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
    6. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
    7. Aghion, Ph. & Dewatripont, M. & Rey, P., 1997. "Corporate governance, competition policy and industrial policy," European Economic Review, Elsevier, vol. 41(3-5), pages 797-805, April.
    8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    9. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    10. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
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    Cited by:

    1. Mark Lijesen, 2013. "Hotelling’s webshop," Journal of Economics, Springer, vol. 109(2), pages 193-200, June.

    More about this item

    Keywords

    information; monopoly; oligopoly; product quality;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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