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Competition intensity, potential competition and transaction cost economics

  • Busse, Matthias

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.

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Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 183.

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Date of creation: 2002
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Handle: RePEc:zbw:hwwadp:26168
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  1. Maurice Obstfeld & Kenneth Rogoff & Ben Bernanke & Kenneth Rogoff, . "The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?," Working Paper 32326, Harvard University OpenScholar.
  2. Helpman, Elhanan, 1998. "The Structure of Foreign Trade," CEPR Discussion Papers 2020, C.E.P.R. Discussion Papers.
  3. Victor V Cordell, 1992. "Effects of Consumer Preferences for Foreign Sourced Products," Journal of International Business Studies, Palgrave Macmillan, vol. 23(2), pages 251-269, June.
  4. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  5. Roy, Santanu & Viaene, Jean-Marie, 1998. "Preferences, Country Bias, and International Trade," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 204-19, May.
  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. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
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