Public Policies in Investment-Intensive Industries

Giovanni Immordino and Michele Polo

Chapter 13 in The Analysis of Competition Policy and Sectoral Regulation, 2014, pp 365-388 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we review some recent work on public intervention in economic environments where firms undertake investments in research or in physical assets, and then select appropriate business practices to extract profits from the outcomes of the investment process. Public policies may take different forms: the release of an authorization; the setting of fines and damages for liability; or the choice of legal standards in antitrust law enforcement. The business practices are privately profitable but may be welfare enhancing or socially harmful. When expectations are optimistic, public policies face a trade-off between ex-ante effects on investment, that suggest hands off, and ex-post control of practices when harmful, that requires intervention. Our general result suggests that public policies should be softer when innovation is an important source of welfare improvements.

Keywords: Competition Policy; Sectoral Regulation; Pattern Asymmetry; Market Consolidation; Grocery Retailing; Pricing Developments; Industry Structure; Price Effects of Mergers; Input Price Shocks; Quantity Discounts (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Public Policies in Investment Intensive Industries (2013)
Working Paper: Public Policies in Investment Intensive Industries (2013)
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