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Competition intensity, potential competition and transaction cost economics

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  • Busse, Matthias

Abstract

As the process of globalisation of the world economy progresses, the degree of international competition among enterprises increases as well. Yet not all industries or branches are affected to the same extent by this development. One of the most important factors which determine the degree of globalisation of an industry is the level of transaction costs. Whereas low transaction costs tend to result in globalised markets, high transaction costs induce segmented markets. Because they may also indicate the degree of potential competition, transaction costs can be of great importance for competition authorities in the case of corporate mergers and acquisitions. Heterogeneous consumer preferences and product differentiation, as two additional determinants of the degree of globalisation, however, limit the meaningfulness of this approach. In some cases, the precision of the measurement of transaction is also inaccurate. This methodology hence cannot be generalised, but does make more sense in particular cases.

Suggested Citation

  • Busse, Matthias, 2002. "Competition intensity, potential competition and transaction cost economics," HWWA Discussion Papers 183, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26168
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    References listed on IDEAS

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    1. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    2. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters,in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
    3. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
    4. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    5. Victor V Cordell, 1992. "Effects of Consumer Preferences for Foreign Sourced Products," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(2), pages 251-269, June.
    6. John Freebairn, 1995. "Competition Policy: Some Neglected Issues in the Hilmer Report," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(3), pages 27-42.
    7. Roy, Santanu & Viaene, Jean-Marie, 1998. "Preferences, Country Bias, and International Trade," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 204-219, May.
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    More about this item

    Keywords

    Transaction costs; potential competition; competition policy;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F00 - International Economics - - General - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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