The Influence of the Oligopolistic Fringe on Economies of New EU Countries on the Example of the Czech Republic

Abstract

Modern economies have to deal with the problem of misusing of monopoly position by enterprises within the frame of so-called imperfect competition which is in spite of facts such as New Economy and competition reinforcing phenomenon of globalization probably irrefragable reality. Bureaus of economy competition protection lead vein fight on the level of nations against monopolistic companies which are abusing their position on the market. Situation is really problematic in small duty closed national economies. Aim of this paper is to answer the question: “Will this situation change – if it will change at all - in countries that newly joined European Union, considering their integration in significantly bigger competition environment of economically integrated Europe:“ Czech Republic which joined European Union was chosen to proof this fact. In four years there came out that many companies, which were monopolistic before joining EU, became oligopolies mainly the ones with dominant firm. A well-known economic theory says that oligopolies in comparison with monopolies have much less possibilities to abuse their position. The situation within the frame of the oligopoly is more competitive. Oligopoly with dominant firm reality analysis has been selected not just for the fact that monopolies of the new EU-members have been turning into this oligopoly option, but mainly because by the other oligopoly options analysis, the results are more hospitable, because of an increasing competition. The graphs in the paper furnish theoretical and graphical proof of above mentioned conclusions in the form of oligopoly price and oligopoly quantity respecting the transition dynamics. The fact, that enterprises in the oligopoly edge that compete with the dominant firm oligopoly have and make use of an extend for positive technology transition, is taken into account. Thereby it comes not only to the product prices change (quasi decrease), but also to increase of the producing quantity and above all to the proportion changes between the quantity which is shared by oligopoly edge and dominant firm. Nevertheless the participation of the oligopoly edge grows significantly. Above mentioned facts or their developments are not even changed by the population increasing incomes that have been analyzed in the paper concurrence oligopoly edge technology transition. In fact e economic integration leads to the increasing space for small and middle enterprises that are frequent carriers of fundamental innovations in production and employ significant part of the country inhabitants. These are firms supported not just by governments but also by EU. Above mentioned microeconomic facts have been fully projected into the Czech economy prosperity on the macroeconomic level. The proof was given by so-called magic quadrangle and its still growing area in the suspense period. The growth of the area has been almost proportional that and it matches to the success economic development theory requests. It is possible to state that the enter of the extra small economy to the economically integrated area of EU can lead – besides others – also by market structure transitions to consolidation of economic prosperity of such small country.