DP574 | Market Integration, Competition and Welfare

Publication Date

01/08/1991

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Abstract

The current debate on the likely impact of completion of the market in the European Community focuses crucially on the nature of the market structure. It has been suggested that 1992 will move an industry from a segmented-markets equilibrium to one in which the national markets are fully integrated. We examine the effects of this form of market completion on prices, consumer welfare and profits using a theoretical model augmented by numerical simulations. We find that the effects of market integration can change qualitatively, according to the assumptions made about demand, the barriers to trade and the degree of concentration in the market.