I have been asked why, if in normal times we think competition is a feature of market-based economies that produces the best outcomes, we now hear that with corona "putting aside any qualms about competition" should be the best way forward for society (thanks @martincschmalz). 1/
Let me use simple steps using IO. As a starter, I’d say a plausible scenario could be one where there are uninternalized positive externalities, e.g. knowledge spillovers (or coordination problems in the supply chain), so that a competitive equilibrium is not ‘good enough’. 2/
But we already have e.g. a system of R&D exemptions for that… So one has to further ask why a) externalities are now bigger than before, b) a relaxation of comp rules would actually fix those externalities & c) the current system is not good to provide exemptions (too slow?). 3/
Here’s an opinion piece of Massimo Motta (who’s always very moderate & thoughtful) arguing that, during this crisis, there can be reasons to be MORE stringent with competition policy (basically, people cannot travel & find substitutes-> more mkt power) dailymaverick.co.za/opinionista/20… 4/
(What I REALLY think is to look at this through the lenses of power. Lobbyists and advocacy groups are extremely well organised & they try to get $$ concessions. A period of crisis is a great opportunity to promote agendas that would not be approved in normal circumstances. 5/
This goes well beyond competition policy: think of Orban or anti-democratic surveillance models that are being endorsed by governments. But IO is very useful too to frame more specific problems.)
FIN/CIAO
FIN/CIAO
