Article ID: | iaor20111778 |
Volume: | 44 |
Issue: | 1 |
Start Page Number: | 171 |
End Page Number: | 200 |
Publication Date: | Feb 2011 |
Journal: | Canadian Journal of Economics/Revue canadienne d'conomique |
Authors: | Forslid Rikard, Hckner Jonas, Muren Astri |
Keywords: | game theory |
This paper first presents stylized evidence showing how the date of the adoption of competition policy is correlated with country size. Smaller countries tend to adopt competition policy later. We then present a theoretical model with countries of different size, trade costs, and firms competing la Cournot. In the model we show that reduced trade costs following from increasing globalization affect countries differently depending on their size. This has implications for the incentives to introduce competition policy. The predictions of the model are consistent with the empirical regularity presented.