nep-com New Economics Papers
on Industrial Competition
Issue of 2016‒03‒29
25 papers chosen by
Russell Pittman
United States Department of Justice

  1. Competitive Capacity Investment under Uncertainty By Li, X.; Zuidwijk, R.A.; de Koster, M.B.M.; Dekker, R.
  2. Vertical Differentiation and Collusion: Cannibalization or Proliferation? By Gabszewicz, Jean J.; Marini, Marco A.; Tarola, Ornella
  3. Screening and Adverse Selection in Frictional Markets By Benjamin Lester; Ali Shourideh; Venky Venkateswaran; Ariel Zetlin-Jones
  4. Behavior-Based Price Discrimination in a Multi-Dimensional Preferences Market By Rosa-Branca Esteves; Qihong Liu; Jie Shuai
  5. The value of incumbency in heterogeneous platforms By Biglaiser, Gary; Crémer, Jacques
  6. Bertand Competition and the Existence of Pure Strategy Nash Equilibrium in Markets with Adverse Selection By Anastasios Dosis
  7. Signals sell: Designing a product line when consumers have social image concerns By Friedrichsen, Jana
  8. Relative Price Dispersion: Evidence and Theory By Kaplan, Greg; Menzio, Guido; Rudanko, Leena; Trachter, Nicholas
  9. Entry by Successful Speculators in Auctions with Resale By Pagnozzi, Marco; Saral, Krista J.
  10. The structure of global inter-firm networks By Mizuno, Takayuki; Ohnishi, Takaaki; Watanabe, Tsutomu
  11. First-Mover Advantage through Distribution: A Decomposition Approach By Nishida, Mitsukuni
  12. On the private and social desirability of mixed bundling in complementary markets with cost savings By Christine Halmenschlager; Andrea Mantovani
  13. Patents and Research Investments: Assessing the Empirical Evidence By Eric Budish; Benjamin N. Roin; Heidi L. Williams
  14. Switching costs and financial stability By Stenbacka, Rune; Takalo, Tuomas
  15. Net Neutrality, Pricing Instruments and Incentives By Joshua S. Gans; Michael L. Katz
  16. Peer-to-Peer Rental Markets in the Sharing Economy By Samuel P. Fraiberger; Arun Sundararajan
  17. Owning, Using and Renting: Some Simple Economics of the "Sharing Economy" By John J. Horton; Richard J. Zeckhauser
  18. Pricing Strategies in Advance Selling: Should a Retailer Offer a Pre-order Price Guarantee? By Oksana Loginova
  19. A Theory of Bidding Dynamics and Deadlines in Online Retail By Dominic Coey; Bradley Larsen; Brennan Platt
  20. The advertising-financed business model in two-sided media markets By Anderson, Simon; Jullien, Bruno
  21. Investigating the Influence of Firm Characteristics on the Ability to Exercise Market Power - A Stochastic Frontier Analysis Approach with an Application to the Iron Ore Market By Germeshausen, Robert; Panke, Timo; Wetzel, Heike
  22. Assessing Market Structures in Resource Markets - An Empirical Analysis of the Market for Metallurgical Coal Using Various Equilibrium Models By Lorenczik, Stefan; Panke, Timo
  23. Structure of global buyer-supplier networks and its implications for conflict minerals regulations By Mizuno, Takayuki; Ohnishi, Takaaki; Watanabe, Tsutomu
  24. The Long Italian Stagnation and the Welfare Effects of Outsourcing By Jacopo Zotti
  25. Functionality of the Kosovo Competition Authority on the basis of European Union standards a guarantee for loyal economy in Kosovo By Krasniqi, Armand

  1. By: Li, X.; Zuidwijk, R.A.; de Koster, M.B.M.; Dekker, R.
    Abstract: We consider a long-term capacity investment problem in a competitive market under demand uncertainty. Two firms move sequentially in the competition and a firm’s capacity decision interacts with the other firm’s current and future capacity. Throughout the investment race, a firm can either choose to plan its investments proactively, taking into account possible responses from the other firm, or decide to respond reactively to the competition. In both cases, the optimal decision at each period is determined according to an ISD (Invest, Stayput, Disinvest) policy. We develop two algorithms to efficiently derive proactive ISD policies for the leader and follower firms. Using data from the container shipping market (2000-2015), we show that the optimal capacity determined by our competitive strategy is consistent with the realized investments in practice. By revealing strategical flexibility of proactive strategies, our results demonstrate that firms in the competition can gain more capacity and profit through such a strategy. Using Monte Carlo simulations, we explore the impact of different market conditions and investment irreversibility levels on capacity strategies. In particular, by comparing the results of competitive strategies and strategies that separate firms into different markets, we show that both firms can benefit from the competition and that market downturns likely lead to investment cascades.
    Keywords: capacity, dynamic investment, proactive strategy, Stackelberg competition, feedback policies
    Date: 2016–03–03
  2. By: Gabszewicz, Jean J.; Marini, Marco A.; Tarola, Ornella
    Abstract: In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multiproduct firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market. The same findings do not hold when firms are horizontally differentiated along a circle.
    Keywords: Vertically Differentiated Markets, Cannibalization, Market Pruning, Price Collusion, Public Economics, D42, D43, L1, L12, L13, L41,
    Date: 2016–03–01
  3. By: Benjamin Lester; Ali Shourideh; Venky Venkateswaran; Ariel Zetlin-Jones
    Abstract: We incorporate a search-theoretic model of imperfect competition into an otherwise standard model of asymmetric information with unrestricted contracts. We develop a methodology that allows for a sharp analytical characterization of the unique equilibrium, and then use this characterization to explore the interaction between adverse selection, screening, and imperfect competition. On the positive side, we show how the structure of equilibrium contracts---and hence the relationship between an agent's type, the quantity he trades, and the corresponding price---are jointly determined by the severity of adverse selection and the concentration of market power. This suggests that quantifying the effects of adverse selection requires controlling for the market structure. On the normative side, we show that increasing competition and reducing informational asymmetries can be detrimental to welfare. This suggests that recent attempts to increase competition and reduce opacity in markets that suffer from adverse selection could potentially have negative, unforeseen consequences.
    JEL: D41 D42 D43 D82 D83 D86 L13
    Date: 2015–12
  4. By: Rosa-Branca Esteves (Universidade do Minho - NIPE); Qihong Liu (Department of Economics, University of Oklahoma, USA); Jie Shuai (Wenlan School of Business, Zhongnan University of Economics and Law, China)
    Abstract: This article is a fir rst look at the profi t and welfare effects of behavior-based price discrimination in a two-period multi-dimensional preferences model. Compared to one-dimensional models, we show that fi rms compete less aggressively in both periods and so new results are obtained. Specifically, under forward looking consumers and two symmetric dimensions, BBPD boosts industry profi ts at the expense of consumers. However, we show that the standard one-dimensional welfare results can prevail under asymmetric dimensions and myopic consumers.
    Keywords: Multi-dimension; competitive price discrimination; customer recognition
    JEL: D43 L13 L40
    Date: 2016
  5. By: Biglaiser, Gary; Crémer, Jacques
    Abstract: We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new way of representing the strategic advantages of incumbency in a static model. We then embed this static analysis in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two platforms will emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the profits of the incumbent when there is only one platform at equilibrium.
    Date: 2016–03
  6. By: Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique)
    Abstract: I analyse a market with adverse selection in which companies competè a la Bertrand by offering menus of contracts. Contrary to Rothschild and Stiglitz (1976), I allow for any finite number of types and states and more general utility functions. I define the generalised Rothschild-Stiglitz Profile of Actions (RSPA), and I show that, in every possible market, if the RSPA is efficient, it is also a pure strategy Nash equilibrium profile of actions. On the contrary, I show that in markets in which the RSPA is not efficient, preferences admit an expected utility representation with strictly increasing and strictly concave VNM utilities and a weak sorting condition holds, no pure strategy Nash equilibrium exists.
    Keywords: Nash Equilibrium,Adverse Selection, Bertrand Competition
    Date: 2016–02–17
  7. By: Friedrichsen, Jana
    Abstract: One important function of consumption is for consumers to show off their taste, virtue or wealth. While empirical observations suggest that producers take this into account, existing research has concentrated on analyzing the demand side. This paper investigates how a monopolist optimally designs its product line when consumers differ both in their taste for quality and their desire for a positive social image. The monopolist distorts qualities and prices to allocate images to consumers. It generically pools consumers with different tastes because high-taste consumers lend a positive image to the product of their choice and thereby increase the product's value to others. Often, average quality is lower than in a market without image concerns and there is underprovision as compared to the welfare-maximizing allocation. Although average quality is higher in a competitive market, welfare typically is not.
    Keywords: image motivation,conspicuous consumption,two-dimensional screening,mechanism design
    JEL: D21 D82 L15
    Date: 2016
  8. By: Kaplan, Greg (Princeton University and NBER); Menzio, Guido (University of Pennsylvania and NBER); Rudanko, Leena (Federal Reserve Bank of Philadelphia); Trachter, Nicholas (Federal Reserve Bank of Richmond)
    Abstract: We use a large dataset on retail pricing to document that a sizable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different prices for the same good. We refer to this phenomenon as relative price dispersion. We argue that relative price dispersion stems from sellers’ attempts to discriminate between high-valuation buyers who need to make all of their purchases in the same store and low-valuation buyers who are willing to purchase different items from different stores. We calibrate our theory and show that it is not only consistent with the extent and sources of dispersion in the price that different sellers charge for the same good, but also with the extent and sources of dispersion in the prices that different households pay for the same basket of goods and with the relationship between prices paid and the number of stores visited by different households.
    JEL: D40 D83 E31 L11
    Date: 2016–01–15
  9. By: Pagnozzi, Marco; Saral, Krista J.
    Abstract: We experimentally analyze the role of speculators, who have no use value for the objects on sale, in auctions. The environment is a uniform-price sealed-bid auction for 2 identical objects, followed by a free-form bargaining resale market. There is always one positive-value bidder, and either one to two speculators who may choose whether to enter the auction. We show that the bidder accommodates speculators by reducing demand in the auction and subsequently purchasing in the resale market, which encourages entry by speculators. The presence of multiple speculators induces each speculator to enter less often, but increases competition in the auction and the auction price. Speculators earn positive profits on average, except when multiple speculators enter the auction
    Keywords: speculators, entry, multi-object auctions, resale, economic experiments
    JEL: C90 D44
    Date: 2016–03–14
  10. By: Mizuno, Takayuki; Ohnishi, Takaaki; Watanabe, Tsutomu
    Abstract: We investigate the structure of global inter-firm relationships using a unique dataset containing information on customers, suppliers, licensors, licensees and strategic alliances for each of 412,814 major incorporated non-financial firms in the world. We focus on three different networks: customer-supplier network, licensee-licensor network, and strategic alliance network. In/out-degree distribution of these networks follows a Pareto distribution with an exponent of 1.5. The shortest path length on the networks for any pair of firms is around six links. The networks have a scale-free property.
    Keywords: Inter-firm relationship, Scale-free network
    Date: 2016–02
  11. By: Nishida, Mitsukuni
    Abstract: Whereas the extant literature on entry-order effects establishes that first entrants often earn higher market shares ("market-share advantage"), the literature on distribution suggests increased distribution has a positive effect on sales. Can distribution help us better understand entry-order effects on market shares? This paper examines how the first entrant in a geographical market achieves a market-share advantage through distribution. For this purpose, I propose a simple method of decomposing sales into physical distribution and sales performance. The data come from a manually collected panel on six major Japanese convenience-store chains from 47 geographical markets between 1991 and 2007. Using an instrumental variable approach to deal with the potential endogeneity of entry order, I find the market-share advantage for the first chain brand is positive. Specifically, the physical distribution, measured by the number of outlets in a market, drives most of the advantage. This paper further finds the density of own outlets is nonmonotonically related (inverted U) to sales performance per outlet, suggesting dynamic outlet expansion faces a trade-off between business-stealing effects within a chain ("cannibalization") and advertising effects through repetition.
    Keywords: fist-mover advantage, pioneering advantage, order of entry, market share, distribution, convenience store, chain, retailing, IV estimation
    Date: 2016–02
  12. By: Christine Halmenschlager (CRED, Université Panthéon-Assas Paris II); Andrea Mantovani (University of Bologna & IEB)
    Abstract: The aim of this paper is to study both the private and the social desirability of a mixed bundling strategy that generates a cost savings effect. We confirm that mixed bundling is the dominant strategy for multiproduct firms, although it may give rise to a prisoner’s dilemma. Moreover, we show that mixed bundling may maximise social welfare, provided that cost savings are sufficiently high. Finally, we highlight the parametric regions where the social and the private interests coincide, and those where they do not. The recent evolution of broadband telecommunications services provides an ideal framework to apply our theoretical predictions.
    Keywords: Regulation, firm performance, telecommunications, multinational firms
    JEL: L51 L25 L96 F23
    Date: 2016
  13. By: Eric Budish; Benjamin N. Roin; Heidi L. Williams
    Abstract: A well-developed theoretical literature — dating back at least to Nordhaus (1969) — has analyzed optimal patent policy design. We re-present the core trade-off of the Nordhaus model and highlight an empirical question which emerges from the Nordhaus framework as a key input into optimal patent policy design: namely, what is the elasticity of R&D investment with respect to the patent term? We then review the — surprisingly small — body of empirical evidence that has been developed on this question over the nearly half century since the publication of Nordhaus's book.
    JEL: O3
    Date: 2016–01
  14. By: Stenbacka, Rune; Takalo, Tuomas
    Abstract: ?We establish that the effect of intensified deposit market competition, measured by reduced switching costs, on the probability of bank failures depends critically on whether we focus on competition with established customer relationships or competition for the formation of such relationships. With inherited customer relationships, intensified competition (i.e., lower switching costs) destabilizes the banking market, whereas it stabilizes the banking market if we shift our focus to competition for the formation of customer relationships. These findings imply that the proportion between new and locked-in depositors is decisively important when determining whether intensified competition destabilizes the banking market or not.
    Keywords: deposit market competition, financial stability, bank failures, switching cost, competition versus stability tradeoff
    JEL: G21 D43
    Date: 2016–03–01
  15. By: Joshua S. Gans; Michael L. Katz
    Abstract: We correct and extend the results of Gans (2015) regarding the effects of net neutrality regulation on equilibrium outcomes in settings where a content provider sells its services to consumers for a fee. We examine both pricing and investment effects. We extend the earlier paper’s result that weak forms of net neutrality are ineffective and also show that even a strong form of net neutrality may be ineffective. In addition, we demonstrate that, when strong net neutrality does affect the equilibrium outcome, it may harm efficiency by distorting both ISP and content provider investment and service-quality choices.
    JEL: D4 D42 D43 L1 L12 L13
    Date: 2016–02
  16. By: Samuel P. Fraiberger (Northeastern University, Network Science Institute, 177 Huntington Avenue, Boston MA 02115); Arun Sundararajan (Leonard N. Stern School of Business, New York University, 44 West 4th Street, New York, NY 10012)
    Abstract: To investigate whether peer-to-peer rental markets for durable goods are welfare-improving, we develop a new dynamic model of such markets in which users with heterogeneous utilization rates may also trade in secondary markets. We calibrate our model with US automobile industry data and transaction-level data from Getaround, a large peer-to-peer car rental marketplace. Counterfactual analyses illustrate significant shifts away from asset ownership as marketplace access grows. Used-good prices fall and replacement rates rise, while gains in consumer surplus range from 0.8% to 6.6%. The changes in consumption mix and the surplus increases are significantly more pronounced for below-median income consumers.
    Keywords: sharing economy, electronic markets, social media, durable goods, collaborative economy, on-demand, collaborative consumption, crowdsourcing, crowdfunding, p2p, Internet, ecommerce, Airbnb, Uber, Lyft, Lending Club, Blablacar, WeWork, Instacart, Ola
    JEL: D4 L1 L81
    Date: 2015–10
  17. By: John J. Horton; Richard J. Zeckhauser
    Abstract: New Internet-based markets enable consumer/owners to rent out their durable goods when not using them. Such markets are modeled to determine ownership, rental rates, quantities, and surplus generated. Both the short run, before consumers can revise their ownership decisions, and the long run, in which they can, are examined to assess how these markets change ownership and consumption. The analysis examines bringing-to-market costs, such as labor costs and transaction costs, and considers the operating platform’s pricing problem. A survey of consumers broadly supports the modeling assumptions employed. For example, ownership is determined by individuals’ forward-looking assessments of planned usage.
    JEL: D23 L1
    Date: 2016–02
  18. By: Oksana Loginova (University of Missouri)
    Abstract: I consider a retailer who sells a new product over two periods: advance and regular selling seasons. Experienced consumers learn their valuations for the product in the advancesellingseason,whileinexperiencedconsumerslearnonlywhentheproductbecomes availableintheregularsellingseason. Theretailerisuncertainaboutthenumberofinexperienced consumers. Production takes place between the periods. Unsold units are scrapped at a price that is below the retailer’s marginal cost, which makes it costly to produce and notsell. Ishowthat whenconsumersare lessheterogeneousin theirvaluations, theretailer shouldimplementadvancesellingandofferapre-orderpriceguarantee. Forsomeparameter con?gurations a pre-order price guarantee acts as a commitment device not to decrease thepriceintheregularsellingseason. Inothersituations,itenablesthesellertoreacttothe information that is obtained from pre-orders by increasing or decreasing the price. When consumersaremoreheterogeneousintheirvaluations,themarketsizeuncertaintyissmall, or the scrap value is high, the retailer should not implement advance selling.
    Keywords: advance selling, demand uncertainty, learning, price guarantee, price commitment, the Newsvendor problem.
    JEL: C72 D42 L12 M31
    Date: 2013
  19. By: Dominic Coey; Bradley Larsen; Brennan Platt
    Abstract: We present an equilibrium search model that parsimoniously rationalizes the use of auctions as a sales mechanism for new-in-box goods--a frequent occurrence in online retail markets--and analyze whether the existence of these auctions is welfare enhancing relative to a market consisting only of posted prices. Buyers have a deadline by which the good must be purchased, and sellers choose between auctions and posted-price mechanisms. As the deadline approaches, buyers increase their bids and are more likely to buy through posted-price listings. The model predicts equilibrium price dispersion even for new, homogeneous goods. Using data on one million auction and posted-price listings for new-in-box items on, we find robust evidence consistent with our model. As predicted, bidders increase their bids from one auction to the next, equilibrium price dispersion exists, and auctions and posted-price listings coexist. Fitting the model to the data, we find that retail auctions increase total welfare by 1.8% of the average retail price if listing fees exactly cover platform costs, but reduce welfare by 2.3% if listing fees are pure profit
    JEL: C73 D44 D83
    Date: 2016–02
  20. By: Anderson, Simon; Jullien, Bruno
    Abstract: This chapter focuses on the economic mechanisms at work in recent models of advertising finance in media markets developed around the concept of two-sided markets. The objective is to highlight new and original insights from this approach, and to clarify the conceptual aspects. The chapter first develops a canonical model of two-sided markets for advertising, where platforms deliver content to consumers and resell their "attention" to advertisers. A key distinction is drawn between free media and pay media, where the former result from the combination of valuable consumer attention and low ad nuisance cost. The first part discusses various conceptual issues such as equilibrium concepts and the nature of inefficiencies in advertising markets, and concrete issues such as congestion and second-degree discrimination. The second part is devoted to recent contributions on issues arising when consumers patronize multiple platforms. In this case, platforms can only charge incremental values to advertisers which reduces their market power and affects their price strategies and advertising levels. The last part discusses the implications of the two-sided nature of the media markets for the choice of content and diversity.
    Keywords: Two-sided markets, ad-financed business model, single-homing consumers, competitive bottlenecks, multi-homing consumers, media see-saws, advertising congestion, genre choice, equilibrium platform variety.
    Date: 2016–03
  21. By: Germeshausen, Robert (Center of European Economic Research (ZEW)); Panke, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Wetzel, Heike (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: This paper empirically analyzes the existence of market power in the global iron ore market dur- ing the period 1993-2012 using an innovative Stochastic Frontier Analysis approach introduced by Kumbhakar et al. (2012). In contrast to traditional econometric procedures, this approach allows for the estimation of firm- and time-specific Lerner indices and, therefore, the assessment of the influence of individual firm characteristics on the ability to generate markups. We find that markups on average amount to 20%. Moreover, location and experience are identified to be the most important determinants of the magnitude of firm-specific markups.
    Keywords: estimation of market power; Lerner indices; Stochastic Frontier Analysis; non-renewable resources
    JEL: D22 L11 L72
    Date: 2014–12–16
  22. By: Lorenczik, Stefan (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Panke, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: The prevalent market structures found in many resource markets consist of high concentration on the supply side and low demand elasticity. Market results are therefore frequently assumed to be an outcome of strategic interaction between producers. Common models to investigate the market outcomes and underlying market structures are games representing competitive markets, strategic Cournot competition and Stackelberg structures that take into account a dominant player acting first followed by one or more players. We add to the literature by expanding the application of mathematical models and applying an Equilibrium Problem with Equilibrium Constraints (EPEC), which is used to model multi-leader-follower games, to a spatial market. Using our model, we inves- tigate the prevalent market setting in the international market for metallurgical coal between 2008 and 2010, whose market characteristics provide arguments for a wide variety of market structures. Using different statistical measures and comparing with actual market outcomes, we find that two previously neglected settings perform best: First, a setting in which the four largest metallurgical coal exporting firms compete against each other as Stackelberg leaders, while the remainders act as Cournot followers. Second, a setting with BHPB acting as sole Stackelberg leader.
    Keywords: Applied industrial organisation; Stackelberg games (MPEC); multi-leader-follower; games (EPEC); Cournot oligopolies (MCP); resource markets;
    JEL: C61 D43 L71 Q31
    Date: 2015–05–15
  23. By: Mizuno, Takayuki; Ohnishi, Takaaki; Watanabe, Tsutomu
    Abstract: We investigate the structure of global inter-firm linkages using a dataset that contains information on business partners for about 400,000 firms worldwide, including all the firms listed on the major stock exchanges. Among the firms, we examine three networks, which are based on customer-supplier, licensee-licensor, and strategic alliance relationships. First, we show that these networks all have scale-free topology and that the degree distribution for each follows a power law with an exponent of 1.5. The shortest path length is around six for all three networks. Second, we show through community structure analysis that the firms comprise a community with those firms that belong to the same industry but different home countries, indicating the globalization of firms' production activities. Finally, we discuss what such production globalization implies for the proliferation of conflict minerals (i.e., minerals extracted from conflict zones and sold to firms in other countries to perpetuate fighting) through global buyer-supplier linkages. We show that a limited number of firms belonging to some specific industries and countries plays an important role in the global proliferation of conflict minerals. Our numerical simulation shows that regulations on the purchases of conflict minerals by those firms would substantially reduce their worldwide use.
    Date: 2016–02
  24. By: Jacopo Zotti (Fondazione Eni Enrico Mattei and University of Trieste, Department of Political and Social Sciences)
    Abstract: The stagnation of the Italian economy over the last two decades is widely documented. During this period, the world economy has become highly integrated, and foreign outsourcing has become a standard practice for firms. While trade theory predicts benefits from the internationalization of production, Italy seems to have gained negligibly from it, or, rather to have lost. In a simple model, we show that this may be the case when markets are overregulated and competition policies are weak. We study a small open economy with one oligopolistic and one competitive sector, which outsources part of its production process abroad. Advances in globalization entail lower tariff rates of outsourcing. Contrary to the common wisdom, we show that national welfare is an inverted U-shaped function of tariffs. There exists a tariff threshold, below which the economy loses from globalization because the competitive sector overproduces and the oligopolistic underproduces (the oligopolistic good has a higher marginal effect on welfare). Competition policies that target the competitive sector lower the threshold and allow the economy to benefit from increased openness.
    Keywords: Italy’s Economic Decline, General Equilibrium, Cournot Oligopoly, Outsourcing
    JEL: D43 D51 F12 L13
    Date: 2015–10
  25. By: Krasniqi, Armand
    Abstract: Legal regulation of market mechanisms and the implementation of economic policies for a fair competition in TEs is a challenging issue. The competition is a complex economic phenomenon that is manifested and characterized by the strength and content that gives to the market economy. In Kosovo specific economic entities, in one way or another, are tempted to gain as much buyers or markets and create much more profits. The problem is connected with the irregularity. Such behavior and unfair actions are not only damaging the image of the country but are a serious threat the harmonious development of the national economy and the country’s accession process to the EU. The parliament of Kosovo established the Kosovo Competition Authority as an independent institution with special competences to control and fight this negative phenomenon. Based to official data it turns out that the effectiveness of this institution is not only incomplete but also non-functional. This is because of the “ignorance” and non-adequate treatment that is reserved for this authority by the parliamentary and governmental institutions. All this because the members are not elected based to regular procedures and not allocating the necessary financial means to operate. At least so far, the Kosovo Competition Authority was not allowed to hire professionals with clear competences to act and investigate the negative phenomenon of unfair competition. Certainly, this situation does not guarantee effective implementation of laws and quality protection of competition. Therefore, the mobilization of parliamentary and governmental levels is needed to enhance professional capacities and increase their competence in scope of the investigation including cooperation with prosecutors and courts. These actions should be reconsidered with the aim of creating a competitive safe environment for all operators. To conclude, the loyal competition policies and legislative framework should be harmonized in forms and content with the policies and rules of the EU.
    Keywords: Competition, competences, legislation, the regulatory authority, EU.
    JEL: K2
    Date: 0215–04–04

This nep-com issue is ©2016 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.