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POLI-1007EL Study Guide - Quiz Guide: Marginal Cost, Market Power, Sunk Costs

Political Science / Science politique
Course Code
Michael Johns
Study Guide

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Competition Politics: Interest groups, democracy & antitrust reform on developing
1. Abstract:
- 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
Market contestability:
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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