Abstract
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)
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)
| Originalsprache | Englisch |
|---|---|
| Erscheinungsort | Vienna |
| Herausgeber | WU Vienna University of Economics and Business |
| Publikationsstatus | Veröffentlicht - 2000 |