What is the full form of SOG
models of competition policy
1. Ordoliberalism of the Freiburg School, Mission statement of full competition: The ordoliberalism of the so-called Freiburg School (Eucken, Böhm, Müller-Armack etc.) can be understood as a kind of third path between a bequeathed laissez-faire economy and a centrally planned administrative economy. Competition is considered to be one Instrument of disempowerment understood what the market form of perfect competition requires. In this, the market price is a given date for the economic agents that cannot be influenced by them (volume adjusters). The model of perfect competition as a model of competition policy is problematic because (a) many small suppliers and buyers do not have the potential for research and development (progress and development function), (b) homogeneous goods and the absence of preferences restrict consumer sovereignty and (c) Complete information and market transparency as well as immediate adjustment do not allow any advantage to be gained.
Constituent and regulating principles: Ordoliberalism demands one strong statewho the Framework conditions in the sense of the rules of the game in a competitive economy must put; Because the economic policy of the so-called old liberalism has shown that unlimited contractual freedom of economic subjects leads to growing monopoly, i.e. to an increase in the freedom for only a few economic subjects. In order to maintain the functionality of the competitive order, Eucken postulates seven so-called constituent and three regulating principles. The seven constituent principles are:
(1) Full competition pricing system;
(2) Creation of a monetary constitution that secures monetary stability;
(3) private ownership of the means of production;
(4) ensuring freedom of contract;
(5) full liability of market participants;
(6) free access to markets (freedom of trade) and
(7) Constancy of economic policy. These seven constituent principles are through three regulating principles added:
(1) active monopoly and oligopoly policies;
(2) Income and economic policy, which is intended to correct certain functional weaknesses in the market economy, and
(3) social policy.
The model of complete competition is to be secured by a strict ban on cartels, preventive merger control as well as a state structural policy and the unbundling of monopolies with a view to maintaining or converting markets into the market form of complete competition. Inevitable (natural) monopolies (natural monopoly) should not be nationalized according to Eucken, but one Abuse Control are subject to a state monopoly office (so-called "As if competition”), Whereby a market result should be realized like with complete competition.
2. Concept of wide oligopoly as a specific form of theWorking competition concept: That from F.W. Kantzenbach developed concept of a functioning competition is based on the Tasks (target functions) of the competition which it has to fulfill:
(1) In the factor markets, competition is supposed to control the functional distribution of income according to market performance (performance-based income distribution), thereby creating exploitation due to market power (Makes) is prevented.
(2) The competition seeks to match the composition of the ongoing supply of goods and services according to buyer preferences (Consumer sovereignty) control, which results in an optimal satisfaction of individual needs with a given income distribution and a given production volume.
(3) The competition seeks to put the production factors in their most productive uses (optimal factor allocation) to steer. As a result, given the state of production technology, the total costs of given production volumes are reduced or the output is increased for given factor input quantities.
(4) The competition aims to continuously adapt products and production capacities to foreign trade data, especially to the constantly changing demand structure and production technology (Flexibility of adaptation) enable. This reduces the extent of bad investments and the economic costs caused by structural changes.
(5) The competition aims to promote the emergence, use and dissemination of technical progress in the form of new products and production methods (technical progress through product and process innovation).
Conclusions: According to Kantzenbach, a competition is functional if it fulfills the five - qua value judgment - predetermined economic target functions as well as possible. In his opinion, this is im Area wide oligopolies With optimal interdependence, i.e. the case with moderate product heterogeneity and limited transparency, since in this market form the opportunities for profit, existential risks and financing options for the company are particularly favorably combined. Against that close oligopoly by a over-optimal interdependence that either led to functionless oligopoly struggles or to a de facto restriction of competition spontaneous solidarity parallel behavior to lead. The Polypol be through one suboptimal interdependence characterized, which, due to a lack of sufficient self-financing options, small absolute company sizes and traditional behavior, does not allow the investments necessary with regard to structural adjustment and technical progress; ruinous competition therefore prevailed in Polypol.
Competition policy recommendations: With regard to the model of the broad oligopoly, narrow oligopolies should, if possible, be unbundled and polypoles with suboptimal interdependence should be transformed into broad oligopolies through the legalization of cartels and the promotion of mergers.
3. Concept of the free competition of the so-called new classics: Hoppmann with its competition concept, which is described as neo-classical, ties in with classical competition theory. He distinguishes two Aims of competition policy:
(1) Securing freedom of competition in the sense of the absence of coercion by third parties (so-called. Freedom of resolution) and the absence of restrictions on exchange transactions by market participants (so-called Freedom of action);
(2) the economic advantages of the competitive process in terms of lower prices, better quality or the introduction of technical progress.
Freedom of competition is seen as a necessary but not a sufficient condition for good market results; rather, a corresponding spirit of competition must be added so that freedom of competition leads to economic advantages. With freedom of competition, the market mechanism leads to a coordination of the plans and actions of the economic objects due to economic incentives and sanctions, which is advantageous for all market participants (so-called system theory approach).
Competition policy recommendations: The freedom of action and decision-making of market participants should be ensured by the Prohibition of certain behavior (e.g. monopoly, discrimination, disability or mergers), whereby those to be set by competition policy Per se rules should be designed as follows:
(1) No positively defined behavior may be prescribed to the economic objects, rather behaviors may only negative be excluded by prohibition.
(2) This prohibition must general-abstract respectively.
(3) The competition rules must apply to all Business objects apply equally.
4. The concept of the so-called Chicago School of Antitrust Analysis: The Chicago School, which in the past has only been identified with monetarism (Friedman et al.), Also developed a concept of competition policy in the 1970s. The competition policy concept of this school (Bork, Demsetz, Director, Posner, Stigler, etc.) had become the model of US antitrust policy during the 1980s under President Reagan.
Elements: The Chicago School understands the market as a free play of forces without government intervention, in which the healthiest and best survive (Survival of the Fittest, so-called social Darwinism); in doing so, the influence of the state on setting a few framework conditions is to be limited. The Objective of the antitrust policy in the view of this school consists solely in maximizing consumer welfare. The Task of competition policy must therefore consist in maintaining market mechanisms that guarantee a maximum of consumer welfare in the sense of an optimal allocation of economic resources. For the antitrust authorities only two efficiency criteria the key factors in assessing competitive practices are:
(1) the allocative efficiency (in the sense of an economically optimal allocation of resources, i.e. supply of the competitive quantity at the competitive price according to the marginal costs = price rule in contrast to the Cournot case (price theory)) and
(2) the productive efficiency (in the sense of an efficient use of resources in the individual companies, e.g. by using economies of scale or transaction cost efficiencies). In order to determine when these two efficiency criteria are guaranteed or at risk, the representatives of the Chicago School want to use the neo-classical price theory, with perfect competition and monopoly serving as reference situations. Increasing operational efficiency thus becomes the exclusive goal of antitrust policy; the other competitive functions (e.g. performance-based distribution of income, consumer sovereignty or technical progress) are excluded from the analysis or not taken into account.
Competition policy recommendations: Since the Chicago School relies on the long-term effect of the market mechanism (lack of private market entry barriers and extremely long-term time horizon) and is also hostile to any state intervention, it generally takes a skeptical stance with regard to state activities in the field of competition. It therefore comes to the following recommendations:
(1) Mergers are generally not considered to be competitive as their primary purpose is to exploit economies of scale or transaction cost economies, to concentrate wealth in the hands of superior companies and to punish inefficient or poor management; In this respect, external growth (concentration) is fundamentally an expression of productive efficiency. Merger control should therefore only be carried out in the USA in the case of horizontal mergers take place with very high market shares. In the case of vertical mergers there would be no direct increase in market share and thus a possible deterioration in market supply; Merger control is therefore only necessary in the event of pronounced market foreclosure effects. Conglomerate mergers represent a "non-problem" in the opinion of the Chicago School.
(2) Anti-competitive behavior is viewed more critically than structure-related concentration. So will for horizontal Agreements called for a strict per se prohibition while vertical Agreements are seen as an increase in the productive efficiency of the acting company and thus an increase in consumer welfare as a whole.
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