Sunday, August 10, 2008
Posted by D. Daniel Sokol
Bertrand Villeneuve, National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST), Université de Tours and Vanessa Yanhua Zhang, LECG make A Case for Affirmative Action in Competition Policy.
ABSTRACT: We analyze the trade-off faced by competition authorities envisaging a one-shot structural reform in a capitalistic industry. A structure is (1) a sharing of productive capital at some time and (2) a sharing of sites or any other non-reproducible assets. The latter represent opportunities. These two distinct dimensions of policy illustrate the importance of a dynamic theory in which firms may differ in several respects. Though equalization of endowments and rights is theoretically optimal, realistic constraints force competition authorities to adopt second-best solutions. Affirmative action here appears to explain why helping the disadvantaged contributes maximally to social surplus.