Functioning competition

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Under functional competition ( English Workable Competition ) refers to a competition , the optimum functioning of the market mechanism allows. There is no closed theoretical concept for this. The idea for this model of competition policy comes from the American economist John Maurice Clark . The term “functional competition”, however, was coined by the German economist Erhard Kantzenbach , who deserves the credit for further developing Clark’s concept of the workable competition (which actually - in Eucken ’s sense - means an “imperfect” competition) and in Germany to have brought it almost to perfection.

The goal of Clark's Workable Competition, as well as the functional competition in the sense of Kantzenbach, is to ensure an optimal overall economic welfare. There is - according to Clark - a distinction

  1. the first best solution , which sees perfect competition as an ideal goal and
  2. the second best solution that allows certain (desired) market imperfections or even wants to bring them about. → so-called antidote thesis , which says that imperfect competition increases its functionality through further specific imperfections.

Competitive functions according to Kantzenbach

According to a list to be found at Kraft , Kantzenbach distinguishes the following competitive functions :

1. Function: Distribution of income according to market performance (performance-based income distribution); In the markets of the factors of production, competition controls the functional distribution of income according to market performance and thus prevents exploitation based on market power. The remuneration based on marginal productivity does not imply justice in the ethical sense, but is preferable to other principles of primary distribution that can be implemented in the market economy;

2nd function: Composition of the current supply of goods according to consumer preferences (i.e. according to demand); thereby the degree of individual satisfaction of needs is increased;

3rd function: Steering the production factors into their most productive application possibilities (optimal factor allocation ); this increases the added value of given factor input quantities;

4. Function: Ongoing flexible adjustment of production capacity to external data, in particular to changes in the demand structure and production technology; this limits the extent of bad investments ;

5. Function: Implementation of technical progress in products and production methods; this will increase the growth rate of overall economic production capacity.

The conception of a functioning competition always presupposes certain imperfections in the sense of the model concept, so that the competition becomes “ workable ”. The difficulty and thus the central problem of the conception of functioning competition therefore consists in the determination of a precisely suitable (not too low, but also not too high) extent of the required imperfections.

Kantzenbach's conception of functioning competition was based on the “new model of competition policy” drawn up by the competition policy working group in the Federal Ministry of Economics in early 1968, which formed the basis for the second amendment (1974) to the Act against Restraints of Competition (GWB).

Market test

There are two approaches to determining whether competition exists in a market:

  • the categorical approach , in which standards are formed that suggest effective competition. These standards are checked in market tests ( performance test ) to determine to what extent they are compatible with real competitive situations . The problem with this approach is that it is not possible to set up competitive situations for all situations. Furthermore, the question of the weighting of the individual criteria is difficult to operationalize.
  • the instrumental approach ( remediability approach ) regards competition as functional if competition cannot be improved by economic policy instruments. The danger here is that (the state) intervenes too often in the market.

Criteria for optimal competition intensity in the sense of a functioning competition

According to Kantzenbach, the number of market participants (suppliers or buyers), i.e. the market structure, is decisive in determining the optimal intensity of competition, according to which the functionality of the competition should be based. The intensity of competition is lowest with a large number of suppliers ( Polypol ), it reaches its maximum with a decreasing number of suppliers in the so-called wide oligopoly , in order to decrease again with a further decrease in the number of suppliers towards the so-called narrow oligopoly. (HH Villard coined the apt designation “competitive oligopoly”, which probably corresponds to Kantzenbach's term “wide oligopoly”.)

With the introduction of the concept of functional competition in the mid-1960s, the idea of ​​competition as a dynamic process prevailed in the Federal Republic of Germany, in the course of which “initiative companies undertake corporate policy advances - they lower prices, improve product quality, create new products or processes - and by imitators pushing in, not immediately, but also not with a long delay, so that the lead can be obtained ... While in the model of complete competition the functions of allocation and power limitation (static functions) dominated, the model of functional competition the function of innovation (dynamic function) in the foreground. "

The importance of innovation in functioning competition

The so-called wide oligopoly found by Kantzenbach as the optimum for functioning competition is recognized as desirable and worthy of protection as an ideal image for an optimal market form in which "dynamic competition" and thus the prerequisites for the competitive innovation process can be realized. Because here, due to the relatively high number of competitors, there is no risk of informal restraints of competition (e.g. price fixing and the like). However, in the vast oligopoly, the possibility of countermeasures by the competition is still so palpable that the competitors are forced to prepare innovations in order to defend their position.

The big problem for competition policy, however, is to determine the limits of the broad oligopoly for all markets where the desired optimum of innovative competition prevails. Furthermore, it is questionable whether the individual companies are in any case able to bear the high personnel and material costs that are inevitably associated with the required innovations.

See also

Individual evidence

  1. ^ A. Kraft: Patent and Competition in the Federal Republic of Germany. Cologne / Berlin / Bonn / Munich 1972, p. 27.
  2. ↑ W. Kartte: A new model for competition policy. Cologne / Berlin / Munich 1969, p. 93 ff.
  3. ↑ E. Kantzenbach: The functionality of the competition. Göttingen 1966, p. 41 ff, 48.
  4. ^ HH Villard: Competition, Oligopoly and Research. In: The Journal of Political Economy. Vol. 66, 1958, p. 483 ff.
  5. ↑ a b c A. Wagner: Economy and economic system of the Federal Republic of Germany. In: Paul Ackermann, Klaus Landfried, Adolf Wagner, Hans-Georg Wehling: Politics. Hoffmann and Campe, Hamburg 1980, ISBN 3-455-09236-5 , p. 128.

literature

  • JM Clark: Toward a Concept of Workable Competition. In: The American Economic Review. Volume 30, No. 2, 1940, pp. 241-256.
  • JM Clark: Competition as a Dynamic Process. Washington 1961.
  • H. Bartling: Guiding principles of competition policy. Vahlen publishing house, Munich 1980.
  • Dietrich Scheffler: The German patent system and medium-sized industry - a theoretical and empirical study. Dissertation. Stuttgart 1986.