FIRM PERSPECTIVES OF OLIGOPOLY HEM IN CONDITIONS OF THE ECONOMICALLY INTEGRATING EUROPE AND THEIR INFLUENCE ON MACROECONOMIC INDICATORS

Authors

  • Jiří Kraft

Abstract

The Czech Republic entranced into the European Union in 2004 to bridge over a disparity collocating to necessity of a mass production in connection with using new technology, which do not pay at a small production quantity – on the one hand, on the other hand attached a low level of the domestic purchase power as a result no high incomes of inhabitants in the Czech Republic, as well as a result small number of customers, and more over, the monopolization of the Czech market bringing quite a number of negatives was solved. But, one question arises more: haw small and medium enterprises influence on the new reality in the Czech Republic. It is a fundamental question, because just the small and medium enterprises employ the most percent of inhabitants, they are a resource of essential innovations, and their share in Czech foreign trade increases markedly. Their increasing share in GDP evidences a dependence of national economy, respectively EU economy just on these subjects of the supply side. Small and medium enterprises present so called “oligopoly hem” in the framework of imperfect competition reality, which an important position in the EU integrated market, where monopolies by competition “powdered” transformed in oligopolies with a dominant firm. An oligopoly price is for customer more favourable than a monopoly price, as well a production quantity is higher. More over, an interest in decreasing costs rises in the oligopoly hem. The costs are too high in contrast with a dominant firm. Simultaneously, other way to increasing profit of an oligopoly hem – analogically as for firms in perfect competition – does not exist. The cost decrease in firms of the oligopoly hem presses the dominant firm to decrease its price. This fact decreases an inflation rate in macroeconomic connection, and more, the share of the dominant firm on the market decreases. It leads to decrease of its production costs, which leads to increasing competitive strength. Then, a balance of foreign trade is influenced too. The comparison of the Czech magic tetragons from 2003 (i.e. in the year before the entrance into the EU), 2004 (i.e. the entrance year), and 2006 (i.e. after the entrance but no immediately) argues a positive evaluation of the Czech Republic entrance into the EU. The surface of Czech magic tetragon is enough large in comparison with the EU tetragon surface, and at the same time, it is increasing at comparison of the Czech economy in 2004 and 2006. However, this fact is not sufficient as an evidence of a success development for economic theory. The tetragon surface has to not only grow up, but the growth has to be equable too. And it gets on in the Czech economy (except minimal changes in the inflation rate, but this stand can be considered as optimal too). A macroeconomic reality influences a microeconomic reality, which determines macroeconomic outcomes consequently. The considered microeconomic reality was the supply side – firms. The market structure in the Czech Republic is an imperfect competition evidently, and variation of forms is typical just for imperfect competition. Without the entrance of the Czech Republic into the EU, respectively without liquidation of custom and other trade restrictions, would be strengthen the monopoly form of imperfect competition on the Czech market, which leads to abuse of producer dominant position very often, namely by monopoly price, or by stagnation in the framework no interest of monopoly in technical economic progress. The entrance of the Czech Republic into the EU influences this reality positively. It gives rise – of course along with other facts – to substitution of the monopoly form into the oligopoly form of imperfect competition.

Published

2013-10-22

Issue

Section

ORIGINAL SCIENTIFIC ARTICLE