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Does a Tougher Competition Policy Reduce or Promote Investment?
Orientador(es)
Resumo(s)
The question of how interventions from the Competition Authority (CA) affect
investment is not a straightforward one: a tougher competition policy might, by
reducing the ability to exert market power, either stimulate firms to invest
more to counter the restrictions on their actions, or make firms invest less
because of the reduced ability to have a return on investment. This tension is
illustrated using two models. In one model investment is own-cost-reducing
whereas in the other investment is anti-competitive. Anti-competitive
investments are defined as investments that increase competitors’ costs. In both
models the optimal level of investment is reduced with a tougher competition
policy. Furthermore, while in the case of an anti-competitive investment a
tougher authority necessarily leads to lower prices, in the case of a cost-
reducing investment the opposite may happen when the impact of the investment on
cost is sufficiently high. Results for total welfare are ambiguous in the cost-
reducing investment model, whereas in the anti-competitive investment model
welfare unambiguously increases due to a tougher competition polic
Descrição
Palavras-chave
Competition Policy, Investment, Welfare
Contexto Educativo
Citação
Editora
Springer Science Business Media