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Global vs.Local Competition

Author

Listed:
  • Patrick Legros
  • Konrad Stahl

Abstract

We analyze the impact of increased outside opportunities brought to consumers by improved access to a global market on local mar- ket performance under monopoly vs. oligopoly. If consumers choose once where to buy, we show that under all forms of organizing the local market, increased competition from the global market will lo- cally crowd out variety. The e ect on prices is much less clear. While increased global competition 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

  • Patrick Legros & Konrad Stahl, 2003. "Global vs.Local Competition," DNB Staff Reports (discontinued) 97, Netherlands Central Bank.
  • Handle: RePEc:dnb:staffs:97
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    File URL: https://www.dnb.nl/binaries/sr097_tcm46-146874.pdf
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    References listed on IDEAS

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    1. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, pages 303-310.
    2. Nicolas Boccard & Patrick Legros, 2017. "Audit Competition in Insurance Oligopolies," Frontiers of Economics in China, Higher Education Press, vol. 12(3), pages 371-399, September.
    3. Anderson, Simon P. & de Palma, Andre, 1999. "Reverse discrete choice models," Regional Science and Urban Economics, Elsevier, pages 745-764.
    4. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
    5. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, pages 579-605.
    6. 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.
    7. Goeree, Jacob K. & Holt, Charles A., 2004. "A model of noisy introspection," Games and Economic Behavior, Elsevier, pages 365-382.
    8. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, pages 181-195.
    9. Anderson, Simon P. & de Palma, Andre, 2000. "From local to global competition," European Economic Review, Elsevier, vol. 44(3), pages 423-448, March.
    10. Aghion, Ph. & Dewatripont, M. & Rey, P., 1997. "Corporate governance, competition policy and industrial policy," European Economic Review, Elsevier, pages 797-805.
    11. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, pages 454-474.
    12. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Volker Nocke & Martin Peitz & Konrad Stahl, 2007. "Platform Ownership," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1130-1160, December.
    2. Patrick Legros, 2005. "Art and the Internet: Blessing the Curse?," Levine's Bibliography 666156000000000502, UCLA Department of Economics.

    More about this item

    Keywords

    Global competition; Monopoly; Oligopoly; Search; Retail Trade;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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