POLI-1007EL Study Guide - Quiz Guide: Marginal Cost, Market Power, Sunk Costs
DepartmentPolitical Science / Science politique
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Competition Politics: Interest groups, democracy & antitrust reform on developing
- Examination of the political origins of antitrust enforcement in the developing world
2. What is competition policy?
- economic competition: the entry of new firms into product markets
o is welfare enhancing: eliminates producer rents, lower prices & lower unemployment.
- Domestic competition policy: set of laws & institutions affecting market contestability; or the
ability of new firms to enter the market
theory of contestable markets, holds that there exist markets served by small number of firms,
which are characterized by competitive equilibria (desirable welfare outcomes) because of existence
of short-term entrants.
three main features:
1 No entry or exit barriers
2 No sunk costs
3 Access to the same level of technology (to incumbent firms and new entrants)
→ not possible in real life; talk about degree of contestability of a market.
Competition policy includes 3 set of institutions:
1. regulations that raise the costs of entering
a. number of procedures required for starting a business is positively correlated with
greater degrees of corruption and negatively associated with economic competition.
b. Meaning: corruption results in more procedures for starting; economic competition
results in less procedures for starting
2. laws governing the financial markets
a. financial system affect market contestability that way, that capital is required for a
3. domestic antitrust
- Antitrust: kartellfeindlich/ monopolfeindlich
- Antitrust policy regulates & sanctions anticompetitive behavior by incumbent firms
- Based on small market size od most developing countries, competition agencies not
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