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Market Transparency and Competition Policy

  • H. Peter Møllgaard

    (Dept. of Economics, Copenhagen Business School)

  • Per Baltzer Overgaard

    (School of Economics and Management, University of Aarhus)

We survey some of the literature on the effects of improved market transparency on competition in oligopoly. Generally, improved transparency from the perspective of firms makes detection of deviations from tacitly collusive agreements easier, thus facilitating oligopolistic coordination. On the other hand, improved transparency from the perspective of consumers, particularly in terms of easier comparability of goods characteristics, has ambiguous effects: More elastic demands make deviations from collusive prices more profitable to firms in the short run, but they also make future retaliation by rivals more severe. Which of these forces will dominate in a dynamic oligopoly competition is shown to depend on the markets-specifics. In light of the theoretical results, we discuss the likely effects on inter-firm competition of information exchange and online trading institutions as well as the American and European competition policy attitude towards market transparency.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2001-03.

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Length: 34 pages
Date of creation: May 2001
Date of revision:
Handle: RePEc:kud:kuieci:2001-03
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