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What effect is the creation of a single market and single currency within the EU likely to have on competition within the EU?
Wiki User
∙ 12y ago
What effect is creation of a single market and a single currency within the EU likely to have on competition within the EU? Why?
The EU with its 500 million consumers has swept away huge numbers of barriers to trade and not least regulatory differences between different countries to bring out common procedures, standards and rules. As a single market and single currency area the degree of competition has become extremely high. The factors that caused this high competition shall be analyzed in the following paragraphs.
A first effect of a single market on competition within the EU is an increase in competition between companies from the EU countries. Trade barriers are swept away which makes it easy for companies to get involved in cross-border trade and extend the number of markets they serve without spending a lot of extra money. This should help to contain inflation and will therefore be beneficial to consumers.
Another effect that a single currency combined with a single market within the EU have on competition is the price transparency across the eurozone. Prices in different countries can be compared easily due to the common currency. The highly developed telecommunication system further boosts the opportunities to compare prices. Obviously, consumers as well as professional purchasers will not pay a higher price at home when they can obtain the same products more cheaply in a neighbouring market. This limits the producers' opportunities to differentiate prices by market and thereby increases price competition and overall competition.
In this context I want to mention eCommerce which also has a significant influence on competition within the EU. It is contributing to competition in two ways:
1) the internet offers highly efficient means of reducing search costs which include the time and effort that it takes to find goods or services of the right price-quality combination
2) eCommerce lowers market entry barriers as it provides the means for...
Wiki User
∙ 12y ago
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