Business Intelligence

Competition Policy And Market Leaders

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Executive Summary

The authors 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. They 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. One of the key objectives of competition policy is to affect market structure and market conduct if they are deemed to be socially undesirable.

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