Socially efficient entry barriers?
DOI:
10.5922/2079-8555-2016-4-3
entry barriers
competition policy
industrial policy
adverse selection
pooling and separating equilibria
Abstract
Stagnation of the Russian economy lends a new urgency to the question of whether reserves of competition incentives can be used to overcome the current negative economic tendencies. The lowering of entry barriers is traditionally considered a universal instrument of promoting competition. However, lower entry barriers can be mistakenly associated with bringing the market closer to the state of the so-called ‘perfect’ competition. The authors aim to show that the absence of entry barriers does not improve competition in certain markets. On the contrary, it may result in a decrease in social welfare. This is particularly true of capital-intensive goods, for instance, large diameter pipes for gas pipelines. Lack of proper competition in such sectors of the market necessitates entry barriers, for they help to achieve a separating equilibrium at the market. Since there are costs associated with creating a separating equilibrium, it is necessary to assess both costs and benefits of the pooling and separating equilibria.
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3. Golovanova, S., Shastitko, A. 2016, Intermediary: They Are Not What You Think They Are. Lessons in Economic Policy, Ekonomicheskaya Politika, no.1, p. 43—60. (In Russ.)
4. Zagorskiy Pipe Plant: using advantages, 2016, Metal-courier, January-February, available at: https://metalexpert-group.com/web/OpenMEMKNews.nsf/Pages/zhurnal_metall_kur_er_16.html/$File/%D0 %9C%D0 %B5 %D1 %82 %D0 %B0 %D0 %BB%D0 %BB-%D0 %9A%D1 %83 %D1 %80 %D1 %8C%D0 %B5 %D1 %80_16_%D1 %8F%D0 %BD%D0 %B2_%D1 %84 %D0 %B5 %D0 %B2_2016.pdf (accessed 11.12.2015). (In Russ.)
5. List of complex investment projects in priority directions of civil industry, 2016, available at: http://minpromtorg.gov.ru/docs/#!perechen_kompleksnyh_investicionnyh_proektov_po_prioritetnym_naprav... (accessed 11.07.2016). (In Russ.)
6. Strategy of promoting competition and of antimonopoly regulation for 2013—2024., 2013, FAS Russia, available at: http://fas.gov.ru/netcat_files/File/Str_razv_konk_i_antimonop_reg_13—14.pdf (accessed 03.07.2016). (In Russ.)
7. Williamson, O. 1996, Ekonomicheskiye instituty kapitalisma [The Economic Institutions of Capitalism]. (In Russ.)
8. Shabalov, I., Shastitko, A., Golovanova, S. 2016. Raspredelenie riskov v infrastrukturnyh proektah s uchastiem krupnogo zakazchika [Risk distribution in infrastructure projects with a large buyer], Moscow, Faculty of Economics, Lomonosov Moscow State University. (In Russ.)
9. Shastitko, A. 2016. On the methodology of institutional research (for the 80-th anniversary of Ronald Coase’s article “The Nature of the Firm”), Voprosy Ekonomiki, no. 8, p. 96—119. (In Russ.)
10. Shastitko, A., Golovanova, S., Kryuchkova, P., Kurdin, A., Ovchinnikov, M., Novikov, V., Pavlova, N. 2012, The Consequences of Weak Competition: Quantitative Evaluation and Policy Implications (Think Tank Report), Ekonomicheskaya Politika, no. 6, p. 5—53. (In Russ.)
11. Shastitko, A., Golovanova, S. 2014. Competition in Procurement of Capital-Intensive Goods for a Large Buyer (Lessons Learned From one Antitrust Case), Ekonomicheskaya Politika, no. 1, p. 67—89. (In Russ.)
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13. Shastitko, A. Y. Novaya institutsionalnaya ekonomicheskaya teoriya [New institutional economic theory], 4th ed., Moscow, TEIS, 828 p. (In Russ.)
14. Shastitko, A., Pavlova, N., Meleshkina, A., Fatikhova, A. 2016, Priorities of Competition Policy in Russia until 2030, Sovremennaya konkurentsiya, Vol. 10, no. 2(56), p. 92—117. (In Russ.)
15. Akerlof, G. 1970, The Market for 'Lemons': Quality Uncertainty and the Market Mechanism, Quarterly Journal of Economics, Vol. 84, no. 3, p. 488—500.
16. Bain, J. 1956, Barriers to New Competition, Cambridge, Harvard University Press.
17. Camerer, C., Lovallo, D. 1999, Overconfidence and Excess Entry: An Experimental Approach, The American Economic Review, Vol. 89, no. 1, p. 306—318.
18. Farrell, J. 1986, Moral Hazard as an Barrier to entry, The RAND Journal of Economics, Vol. 17, no. 3, p. 440—449.
19. Fisher, F. M. 1979, Diagnosing Monopoly, Quarterly Review of Economics and Business, Vol. 19, no. 2, p. 7—33.
20. Gilbert, R. 1989, Mobility Barriers and the Value of Incumbency, Handbook of Industrial Organization, Vol. 1, Ch. 8, p.475—535.
21. Grossman, G., Horn, H. 1988, Infant-Industry Protection Reconsidered: The Case of Informational Barriers to Entry, The Quarterly Journal of Economics, Vol. 103, no. 4, p. 767—787.
22. Grubb, M. D. 2015, Behavioral Consumers in Industrial Organization, Review of Industrial Organization, Vol. 47, no. 3, p. 247—258.
23. Irwin, F. W. 1953, Stated Expectations as Functions of Probability and Desirability of Outcomes, Journal of Personality, Vol. 21, no.3, p. 329—335.
24. McAfee, R. P., Mialon, H. M., Williams, M. A. 2004, What Is a Barrier to Entry? The American Economic Review, Vol. 94, no. 2, p. 461—465.
25. Slovic, P. 2000, The Perception of Risk, Earthscan. London, UK.
26. Slovic, P., Fischoff, B., Lichtenstein, S. 1982, Facts vs. Fears: Understanding Perceived Risk. In: Kahneman, D., Slovic, P., Tversky, A. (eds.), Judgment Under Uncertainty, Chap. 33, Heuristic and Biases, Cambridge University Press. Cambridge, UK.
27. Stigler, G. 1968, The Organization of Industry., Chicago, IL, University of Chicago Press.
28. Von Weizsacker, C. C. 1980, A Welfare Analysis of Barriers to Entry, The Bell Journal of Economics, Vol. 11, no. 2, p. 399—420.
29. Weinstein, N. D. 1980, Unrealistic optimism about future life events, Journal of Personality and Social Psychology, Vol. 39, no. 5, November, p. 806—820.