Competition Policy and Market Leaders

Posted by D. Daniel Sokol

Ilir Maçi (Charles University - Economics) and Kresimir Zigic (Charles University - Economics) discuss Competition Policy and Market Leaders.

ABSTRACT: We study the potential loss in social welfare and changes in incentives to invest in R&D that result when the market leading firm is deprived of its position. We show that under plausible assumptions like free entry or repeated market interactions there is a social value of market leadership and its mechanical removal by means of competition policy is likely to be harmful for society.