ECONOMIC MECHANISM MODIFICATION UNDER THE INFLUENCE OF MARKET POWERJournal: Herald of Kyiv National University of Trade and Economics (Vol.87, No. 1)
Publication Date: 2013-02-14
Authors : GERASYMENKO Anzhelika;
Page : 5-19
Keywords : market power; economic system; economic mechanism; regulation; intercompany contracting; social capital.;
The paper grounds an important role of market power in creation of modern economic mechanism. The evolution of economic mechanism determines its polycentrism, which lets the author illustrate the economic mechanism modification by market power. The paper emphasizes modification of the mechanism of state regulation of economy under market power impact. The recent unpopularity of public interest theory, which has been caused by the lack of empirical evidences of its consistency, induces growth in popularity of state capture theory. The latter determines state regulation as an instrument of economic rent maximization by market power holder, who is a requester of the regulation. The author investigates an impact of tariff regulation on rail freight on the economic environment and equilibrium parameters on trucking market and on the range of downstream markets of imported goods considering changes in delivery costs. The negative influence of the requested state regulation ordered by powerful firms on the productive and allocative efficiency is revealed on adjacent markets as well as in the whole economy. Mentioned above on the example of transport industry method of state capture and the next modification of economic mechanism is widespread today. The statistics of lobby proves this fact. The article explains market power impact the institutes of inter firm contracting and social capital. Their capture by market power holders distorts exchange proportions in economic system, however it reduces uncertainty in economics that deprives motives to correct those proportions. So modern market mechanism is being changed under the influence of market power, it loses its orientation from social welfare maximizing to maximizing economic rent of market power holders.
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