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Competition intensity, potential competition and transaction cost economics

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  • Busse, Matthias

Abstract

As the process of globalisation of the world economy progresses, the degree of international competition among enterprises increases as well. Yet not all industries or branches are affected to the same extent by this development. One of the most important factors which determine the degree of globalisation of an industry is the level of transaction costs. Whereas low transaction costs tend to result in globalised markets, high transaction costs induce segmented markets. Because they may also indicate the degree of potential competition, transaction costs can be of great importance for competition authorities in the case of corporate mergers and acquisitions. Heterogeneous consumer preferences and product differentiation, as two additional determinants of the degree of globalisation, however, limit the meaningfulness of this approach. In some cases, the precision of the measurement of transaction is also inaccurate. This methodology hence cannot be generalised, but does make more sense in particular cases.

Suggested Citation

  • Busse, Matthias, 2002. "Competition intensity, potential competition and transaction cost economics," HWWA Discussion Papers 183, Hamburg Institute of International Economics (HWWA).
    • Handle: RePEc:zbw:hwwadp:26168
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    More about this item

    Keywords

    Transaction costs; potential competition; competition policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F00 - International Economics - - General - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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