European Integration: Strategic Market Research and Industry Structures

Jacek Cukrowski, Manfred M. Fischer

    Publikation: Working/Discussion PaperWorking Paper/Preprint

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    The paper is concerned with the impact of market research prior to integration, on
    the structures of noncompetitive industries in integrated economy. The analysis focuses
    on separated, single commodity, monopolistic markets with stochastic demand.
    Monopolistic firms are considered in dynamic multiperiod model, where intertemporal
    links are determined by expenditures on market research in a present period and benefits
    from this activity (i.e., smaller variance of the prediction error) in the future. Assuming
    that each firm maximizes its total discounted expected utility from profit in indefinite
    time, we show that the optimal market research strategy is stationary and depends on
    market size. Consequently, in the period following integration firms operating prior to
    integration in small markets (such as Slovenia, Czech Republic, Hungary or Estonia) are
    expected to have much less information about the integrated market than their
    competitors operating before integration on European market. This informational
    asymmetry may affect the structure of the industry in integrated economy. In the
    extreme case, the firm operating before integration in the small market can be ruled out
    from the integrated market. (authors' abstract)
    HerausgeberWU Vienna University of Economics and Business
    PublikationsstatusVeröffentlicht - 2000