The Effect of Economic Integration in Oligopolistic Markets

Abstract

Finland’s membership in the EU liberalised the trade of processed food between Finland and the other union countries, which increases the international competition in the food sector in Finland. As a member of the EU, Finland no longer applies tariffs and quantitative restrictions against imports from the single market of the EU. Furthermore, Finnish agriculture is adjusted to the Common Agricultural Policy (CAP) of the EU. This means that producer prices of agricultural products are reduced to the EU levels. Farmers’ incomes have been estimated to decrease considerably and, therefore, different forms of support are directed to agriculture for ensuring the incomes of existing farms in Finland (Kettunen and Niemi, 1994). In the field of food manufacturing, the potential effects of market integration are usually linked to the cost efficiency and competitiveness of Finnish industries. The competitive effects of the reduction of the potential market power of food manufacturing due to the concentration on the nationally segmented markets have usually not been considered in the previous studies.