Customs Union, Market Structure and Firm Size

Abstract

A number of reasons present themselves for investigating the impact of customs union upon market structure and firm size. A first one is that, in the Western Europe of the 1950’s, domestic markets were characterized by sometimes fairly high degrees of seller concentration. This raises the question whether the customs union would constrain ‘monopolistic’ pricing behaviour and, in addition, whether domestic monopolists would always find it in their interests to encroach upon other country markets in the union. It is analyzed in section 1. Second, the possibility of seizing scale economies through intra-union exports raises questions about the degree of both domestic and union-wide seller concentration over time. Should one expect the number of domestic producers to go down, and even if that is so, should one expect the number of sellers in every domestic market to decrease as well? This question is taken up in section 2.