Competition Policy in Central East Europe in light of EU Accession
Johannes Stephan
Journal of Common Market Studies,
2004
Abstract
This study reviews the progress made in EU accession candidates on competition policy. The analysis shows that institution-building and legislation are well under way and that anti-trust practice is not too lax. Due to the diversity among the accession countries under review, the study finds that the strictly rule-based frame work of the EU might not be the most favourable solution for some candidates: firstly, the small and open economies of most candidates make it particularly difficult to define the ‘relevant market’ in competition cases. Secondly, the traditionally intense vertical integration of production in accession states calls for a reassessment of ‘vertical restraints’. The policy implications of this study suggest that the EU competition task force should take a proactive, case-by-case approach vis-à-vis its new members.
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Softening Competition by Inducing Switching in Credit Markets
Jan Bouckaert, Hans Degryse
Journal of Industrial Economics,
Nr. 1,
2004
Abstract
We show that competing banks relax overall competition by inducing borrowers to switch lenders. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclosing borrower information. By doing this, they invite rivals to poach their first-period market. Disclosure of borrower information increases the rival's second-period profits. This dampens competition for serving the first-period market.
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Firm-Specific Determinants of Productivity Gaps between East and West German Industrial Branches
Johannes Stephan, Karin Szalai
IWH Discussion Papers,
Nr. 183,
2003
Abstract
Industrial productivity levels of formerly socialist economies in Central East Europe (including East Germany) are considerably lower than in the more mature Western economies. This research aims at assessing the reasons for lower productivities at the firm level: what are the firm-specific determinants of productivity gaps. To assess this, we have conducted an extensive field study and focussed on a selection of two important manufacturing industries, namely machinery manufacturers and furniture manufacturers, and on the construction industry. Using the data generated in field work, we test a set of determinant-candidates which were derived from theory and prior research in that topic. Our analysis uses the simplest version of the matched-pair approach, in which first hypothesis about relevant productivity level-determinants are tested. In a second step, positively tested hypothesis are further assessed in terms of whether they also constitute firm-specific determinants of the apparent gaps between the firms in our Eastern and such in our Western panels. Our results suggest that the quality of human capital plays an important role in all three industrial branches assessed. Amongst manufacturing firms, networking activities and the use of modern technologies for communication are important reasons for the lower levels of labour productivity in the East. The intensity of long-term strategic planning on behalf of the management turned out to be relevant only for machinery manufacturers. Product and process innovations unexpectedly exhibit an ambiguous picture, as did the extent of specialisation on a small number of products in the firms’ portfolio and the intensity of competition.
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Merger Control and Competition Policy in Central East Europe in view
Johannes Stephan
ICFAI Journal of International Business Law,
2003
Abstract
Im Zuge der Beitrittsverfahren sind die EU Kandidatenländer gezwungen, das institutionelle Regelwerk der Union (den acquis communautaire) voll- ständig zu übernehmen. Dabei handelt es sich um ein Regelwerk, das in ausgereiften Marktwirtschaften gewachsen ist. Es stellt sich somit die Frage nach seiner Kompatibilität für die noch recht jungen Marktwirtschaften in Mittel- und Osteruropa mit ihrem deutlich niedrigeren Entwicklungsniveau. Potentielle Konfliktpunkte könnten insbesondere bei der Ausgestaltung und Durchsetzung der Wettbewerbspolitik erwartet werden: Viele (ehemalige) Staatsunternehmen im Restrukturierungsprozess sind bisher nicht wett- bewerbsfähig, staatliche Beihilfen und eine laxere Kontrolle von Marktmacht könnten Wettbewerbsverzerrungen im gemeinsamen europäischen Markt hervorrufen. Tatsächlich zeigt sich aber, dass die Kandidatenländer nicht nur bereits das vollständige diesbezügliche Regelwerk implementiert haben, auch zeigt die Analyse der behandelten Fälle, dass die Durchsetzung der Wettbewerbspolitik dort den strengen Vorgaben der EU entspricht: Der pragmatische Weg Ungarns greift lediglich dort in den Markt ein, wo regionale und soziale Ungleichgewichte zu korrigieren sind, Polen hält streng die vorgegebenen Regeln zur Verhinderung monopolistischer Marktmacht ein und hat fiskalische Kontrollmechanismen seiner staatlichen Beihilfepolitik installiert. Insgesamt scheinen die Kandidatenländer die Wettbewerbspolitik des europäischen Binnenmarktes also durchaus zu verkraften. Als problematisch erwies sich aber vor allem die Definition des relevanten Marktes für die besonders offenen Volkswirtschaften in Mittel- und Osteuropa. Eine mögliche Handlungsempfehlung bestünde in einer weniger regelgebundenen Behandlung der Wettbewerbspolitik, die proaktiv Fall für Fall gesondert betrachtet. Dieses Argument wird insofern weiter unterstützt, als sich die institutionelle Kooperation zwischen der EU Kommission und den Kandidatenländern erst im Aufbau befindet, die neuen Mitglieder sich also am unteren Ende der institutionellen Lernkurve befinden.
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A revised theory of contestable markets : applied on the German telecommunication sector
Christian Growitsch, Thomas Wein
Externe Publikationen,
Nr. 275,
2002
Abstract
Despite the scepticism raised by the German Monopoly Commission our analysis shows that the revised theory of contestable markets can be applied to the telecommunications market better than expected. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit is possible without any costs, and the price adjustment lag exceeds the entry lag. Our analysis shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions are satisfied for potential competition to exist. We applied the ‘revised’ contestable market theory to the German telecommunication market and have been able to clearly identify the value added stages in which regulation is required. Under the present conditions local loops - which can be determined as natural monopolies - are not contestable due to sunk costs, high entry lags expected and a probable short price adjustment lag. Local loops can be identified as monopolistic bottlenecks therefore. Regional and local connection networks should also be regulated because a high entry lag and a low price adjustment lag have to be expected as well as current competition does not exist today. The national connection network shows current competition between several network providers; hence regulation can be abolished in this field. Assumed that network access is regulated, services can be supplied by several competing firms.
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Bank Concentration and Retail Interest Rates
S. Corvoisier, Reint E. Gropp
Journal of Banking and Finance,
Nr. 11,
2002
Abstract
The recent wave of mergers in the euro area raises the question whether the increase in concentration has offset the increase in competition in European banking through deregulation. We test this question by estimating a simple Cournot model of bank pricing. We construct country and product specific measures of bank concentration and find that for loans and demand deposits increasing concentration may have resulted in less competitive pricing by banks, whereas for savings and time deposits, the model is rejected, suggesting increases in contestability and/or efficiency in these markets. Finally, the paper discusses some implications for tests of the effect of concentration on monetary policy transmission.
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FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint E. Gropp, Kristina Kostial
Finance & Development,
Nr. 2,
2001
Abstract
OECD countries with high corporate tax rates have experienced both high net outflows of foreign direct investment and a decline in corporate tax revenue. Identification of a causal link between these two trends has implications for the debate on tax harmonization versus tax competition.
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FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint E. Gropp, Kristina Kostial
Finance & Development,
Nr. 2,
2001
Abstract
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Price Competition between an Expert and a Non-Expert
Jan Bouckaert, Hans Degryse
International Journal of Industrial Organization,
Nr. 6,
2000
Abstract
This paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert's repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behavior of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a 'timid-pricing' equilibrium results. If the non-expert's repair technology performs well enough, it pays for some consumers to disregard the non-expert a visit. They directly go to the expert's shop, and an 'aggressive-pricing' equilibrium pops up. For intermediate values of the non-expert's successful repair a 'mixed-pricing' equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
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Spillover Effects and R&D-Cooperations - The Influence of Market Structure
Anita Wölfl
IWH Discussion Papers,
Nr. 122,
2000
Abstract
This paper examines empirically the role of market structure for the influence of spill-over effects on R&D-cooperations. The results of a microeconometric analysis, based on firm data on innovation, let in general presume that with intensified competition also the influence of spillovers on R&D-cooperation increases. However, competition seems to induce firms to search for effective firm-specific appropriation facilities first. Spillovers that are sufficiently high such that the internalisation effect from R&D-cooperation more than outweighs the competitive effect from research, only arise whenever firms are not able to protect their research results through any appropriation facility. Additionally, there is some evidence that spillover effects may even hinder firms from cooperating in R&D when there is intensive competition on the research stage.
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