DP3333 Global versus Local Competition

Author(s): Patrick Legros, Konrad O Stahl
Publication Date: April 2002
Keyword(s): information, monopoly, oligopoly, product quality
JEL(s): D83, L13, L14, L15
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3333

We analyse the impact of increased outside opportunities brought to consumers by access to a global market on local market performance under monopoly versus oligopoly. If consumers have to choose once where to shop we show that under all forms of organizing the local market, increased competition from the global market will crowd out variety in the local one. The effect of increased global competition on prices is much less clear. While it yields a price reduction under monopoly, prices may increase under oligopoly. We check the robustness of these results in various extensions and draw consequences on competition and industrial policies.