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Economic Integration as Competitive Discipline

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  • Fung, K C

Abstract

This paper reexamines the standard notion that economic integration will promote competition. Using an illustrative model, it is shown that integration will indeed enhance competition if the foreign firm is the low-cost producer. But if the foreign firm is the high-cost producer, integration will retard competition if the initial tariff level is low. The results of this paper suggest that trade liberalization does not always provide competitive discipline. Competition policy must still be actively enforced even when economies are becoming increasingly open. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Fung, K C, 1992. "Economic Integration as Competitive Discipline," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 837-847, November.
    • Handle: RePEc:ier:iecrev:v:33:y:1992:i:4:p:837-47
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    Cited by:

    1. Marta Ferreira Dias & Silvia F. Jorge, 2017. "Market power and integrated regional markets of electricity: a simulation of the MIBEL," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 6(2), pages 45-67, November.
    2. Delina Agnosteva & Constantinos Syropoulos & Yoto V. Yotov, 2017. "Multimarket Linkages, Cartel Discipline and Trade Costs," CESifo Working Paper Series 6829, CESifo.
    3. Akinbosoye, Osayi & Bond, Eric W. & Syropoulos, Constantinos, 2012. "On the stability of multimarket collusion in price-setting supergames," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 253-264.
    4. Agnosteva, Delina & Syropoulos, Constantinos & Yotov, Yoto, 2020. "Preferential Trade Liberalization with Endogenous Cartel Discipline: Implications for Welfare and Optimal Trade Policies," School of Economics Working Paper Series 2020-9, LeBow College of Business, Drexel University.
    5. Roux, Catherine & Santos-Pinto, Luís & Thöni, Christian, 2016. "Home bias in multimarket Cournot games," European Economic Review, Elsevier, vol. 89(C), pages 361-371.
    6. L. Colombo & P. Labrecciosa & L. Lambertini, 2005. "A Chicken Game of Intraindustry Trade," Working Papers 548, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.
    8. Dermot Leahy & J. Peter Neary, 2013. "Oligopoly and Trade," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 7, pages 197-235, Palgrave Macmillan.
    9. J. Peter Neary & Joe Tharakan, 2005. "Endogenous mode of competition in general equilibrium," Working Papers 200526, School of Economics, University College Dublin.
    10. Neary, J. Peter & Tharakan, Joe, 2012. "International trade with endogenous mode of competition in general equilibrium," Journal of International Economics, Elsevier, vol. 86(1), pages 118-132.
    11. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 163-198, December.
    12. Philipp J. H. Schröder, 2007. "Cartel Stability and Economic Integration," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 313-320, May.
    13. Gaussens, Olivier & Lecostey, Sophie & Simon, Geoffray, 2011. "Intégration internationale et concurrence effective : quelques apports de la théorie de l’oligopole," L'Actualité Economique, Société Canadienne de Science Economique, vol. 87(4), pages 481-502, décembre.
    14. Damoun Ashournia & Per Svejstrup Hansen & Jonas Worm Hansen, 2013. "Trade Liberalization and the Degree of Competition in International Duopoly," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 1048-1059, November.
    15. Delina E. Agnosteva & Constantinos Syropoulos & Yoto V. Yotov, 2024. "Preferential trade liberalization with endogenous cartel discipline: Implications for trade and welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(4), pages 1109-1136, November.
    16. Cuervo-Cazurra, Alvaro & Un, C. Annique, 2007. "Regional economic integration and R&D investment," Research Policy, Elsevier, vol. 36(2), pages 227-246, March.
    17. Ioana Veronica ALEXA & Simona Valeria TOMA & Daniela Ancuţa SARPE, 2013. "Strategic Investment and Trade in an Oligopolistic Setting," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 5-10.
    18. Eric W. Bond & Constantinos Syropoulos, 2008. "Trade costs and multimarket collusion," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1080-1104, December.

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