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Unification of Oligopolistic Markets for a Homogeneous Good in the Presence of an Antitrust Commission

Unification of Oligopolistic Markets for a Homogeneous Good in the Presence of an Antitrust... A basic framework is provided to explain the integration process experienced by oligopolistic markets serving a homogeneous good in different countries. Over the past few decades, such processes have been observed, for instance, in some European markets – in particular, in the energy sector. The idiosyncratic element here is the introduction of an exogenously given antitrust commission that supervises competition in the market and has the authority to fine firms for anticompetitive behavior. We model the unification decision as a simple cooperative non-transferable utility game. We find that the creation of an antitrust commission plays a major role in providing the necessary incentives for market unification. In particular, the commission is able to induce unification of all markets via appropriate choice of antitrust policy. This stands in stark contrast to the benchmark scenario in which the antitrust commission is absent – here, market unification never occurs. We propose the Iberian Electricity Market (MIBEL) as a case study. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Unification of Oligopolistic Markets for a Homogeneous Good in the Presence of an Antitrust Commission

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References (30)

Publisher
Springer Journals
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-014-0186-0
Publisher site
See Article on Publisher Site

Abstract

A basic framework is provided to explain the integration process experienced by oligopolistic markets serving a homogeneous good in different countries. Over the past few decades, such processes have been observed, for instance, in some European markets – in particular, in the energy sector. The idiosyncratic element here is the introduction of an exogenously given antitrust commission that supervises competition in the market and has the authority to fine firms for anticompetitive behavior. We model the unification decision as a simple cooperative non-transferable utility game. We find that the creation of an antitrust commission plays a major role in providing the necessary incentives for market unification. In particular, the commission is able to induce unification of all markets via appropriate choice of antitrust policy. This stands in stark contrast to the benchmark scenario in which the antitrust commission is absent – here, market unification never occurs. We propose the Iberian Electricity Market (MIBEL) as a case study.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Feb 27, 2015

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