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Why and How the European Union controls dominance - Essay Example

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All wealth that fulfills the wants of consumers constitutes the wealth of a nation. Therefore, the aim behind expanding wealth is broadening the choices of the consumers is terms of quality, quantity and variety. Economists are involved in researches on the idea of free market with socially optimal allocation…
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Why and How the European Union controls dominance
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Download file to see previous pages Economists are involved in researches on the idea of free market with socially optimal allocation. The notion of competition constitutes the central part of economic theory. Controversies exist among the policy makers on the way competition contributes in the process of development. One can witness contrasting thoughts about the meaning of competition in the economic history. Among the different forms of competition, perfect competition has been able to find a place as the standard model of analysis. During the time of Adam Smith, the concept of competition was popular and viewed as independent rivalry among people. Some of the views suggest competition as a tool that will eliminate profits in the long run. But perfect competition and monopoly rules the real market conditions. Therefore conditions imposed by imperfect competition and asymmetric information calls for inefficient competitive equilibria (Cook, 2001, p. 4). The different ways in which the authorities of national government and the European Union look into markets so that it can work better is regarded as the policy of competition. The framework of the policy of competition has not been string for the low income economies. A wide range of policy measures influences the competition policy. The policy measures include policies that are subjected towards trade, employment and industry. There have been cases where it developed ways that protect the domestic competition instead of promoting competition between the competitors (Motta, 2004, p. 3). The aim behind the policy of competition is to achieve economic welfare and efficiency at the highest level. The European commission joined hands with the authorities of national competition with the aim to ensure free and fair mode of competition in the European Union. However the aim of the competition policy is to promote competition. If markets are made to work better it will contribute to increase efficiency and competitiveness of the economy of UK within the single market of the European Union. Competition ensures broader choices for the consumer in the markets for goods and services and advancement in technology which promotes gains in dynamic efficiency. The policy of competition will also ensure competition in price between the suppliers. The policy can also investigate complaints on anti-competitive behavior within markets. This type of behavior can have negative effect on the welfare of the consumer. In the UK and the European Union there are four pillars of the policy of competition. The first pillar i.e. antitrust and cartels involves removal of contracts which looks to restrict competition. The second pillar i.e. liberalization of market works on introducing fresh competition in sectors of monopolistic competition. The policy of competition analyses the state aided measures. This ensures that the measures taken cannot distort the competition in the single market. This concludes the third pillar i.e. state aid control. The forth pillar of the policy of competition investigates mergers and take-overs between firms (Bennett, 2010, p. 3). A firm is able to hold a strong foothold in the market if its economic power provides the firm the opportunity to operate within the market without taking into consideration the reaction of the competitors or the consumers. The European Commission considers the share of the market and some other factors like ability of the competitors and access of the firm to raw materials and control on the network of distribution while appraising the economic power of a firm. If the firm is able to hold its dominant position because of its own efficiency it is highly credible. But if the firm maintains its position by exploiting the power of competition, it is bound to be an ...Download file to see next pagesRead More
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