Contemporary Competition: Process or Result?

DOI: 10.20542/0131-2227-2021-65-8-5-13
N. Rozanova (,
National Research University Higher School of Economics (HSE), 20, Myasnitskaya Str., Moscow, 101000, Russian Federation

Received 18.11.2020.

Abstract. Digital economy has significantly changed business reality. The radical transformations are ubiquitous. New patterns feature economic behaviour of market participants, their interactions, their business models and their market activities. What about competition? What forms of competitive conduct have lost importance in contemporary digital economy? And what are the newest strategies that enhance competitiveness of the firms? Which digital business practices could limit competition? And which of them could stimulate business rivalry? Digitalization has changed many, in not all, of our traditional conceptual visions in the area of competition, market, market power, relevant market actors. The nature of competition itself is under scrupulous investigation. What conclusions could we draw from current theoretical and empirical analyses of competition mechanism? First of all, we deal with new forms of competition. The old Schumpeterian question – whether competition is a creative innovative destruction or it leads only to unfair elimination of competitors from the market – has arisen again nowadays. Online competition has two radically different outcomes. On the one hand, lower transaction costs, more possibilities to compare prices and assortment, expanding markets beyond geographical limits, low entry barriers reinforce rivalry. On the other hand, online activity of the firms can mitigate competitive pressure though new forms of product differentiation and usage of phantom strategies, phantom products, phantom plans. In order to increase their overall competitiveness, firms have elaborated an O2O (online-to-offline) business model that is allowed to utilize virtual and actual activity at the same time. Restaurant business, cosmetic industry, taxi deals are examples of its successful implementation. Is more competition better for consumers? This concept has been considered doubtful. Digital competitive pressure has led to a novel format of product differentiation, that is, targeted product design. Unlike traditional view in line with Salop circular model, contemporary firms choose product strategies that target as little individuals as possible. The less the circle of potential clients is, the less their price elasticity would be, and the weaker price rivalry might become. Traditional concept views competition as a Markov stochastic process. Contemporary analyses demonstrate more complicated nature of competitive mechanism. Online and offline innovations transform competition into non-linear process with “humps and jumps”, the outcomes of which are not always in the interests of consumers’ welfare.

Keywords: competition, digitalization, competitive behaviour


  1. Gebhardt G. Measuring the Competitive Impact of the Internet: Evidence from a Natural Experiment in Broadband Access. International Journal of Industrial Organization, 2018, vol. 57, pp. 84-113.
  2. Fershtman C., Fishman A., Zhou J. Search and Categorization. International Journal of Industrial Organization, 2018, vol. 57, pp. 225-254.
  3. Gupta S., Gallear D., Rudd J., Foroudi P. The Impact of Brand Value on Brand Competitiveness. Journal of Business Research, 2020, vol. 112, pp. 210-222.
  4. Xi N., Hamari J. Does Gamification Affect Brand Engagement and Equity? A Study in Online Brand Communities. Journal of Business Research, 2020, vol. 109, pp. 449-460.
  5. Wang S., Chen H., Wu D. Regulation Platform Competition in Two-sided Markets under the O2O Era. International Journal of Production Economics, 2019, vol. 215, pp. 131-143.
  6. Gonzalez-Maestre M., Granero L. Competition with Targeted Product Design: Price, Variety, and Welfare. International Journal of Industrial Organization, 2018, vol. 59, pp. 406-428.
  7. Salop S. Monopolistic Competition with Outside Goods. The Bell Journal of Economics, 1979, vol. 10, no. 1, pp. 141-156.
  8. Chen Y., Riordan M. Price-Increasing Competition. The RAND Journal of Economics, 2008, vol. 39, no. 4, pp. 1042-1058.
  9. Thomadsen R. Product Positioning and Competition: the Role of Location in the Fast-Food Industry. Marketing Science, 2007, vol. 26, no. 6, pp. 792-804.
  10. Ward M., Shimsback J., Perloff J., Harris J. Effects of the Private-label Invasion in Food Industries. American Journal of Agricultural Economics, 2002, vol. 84, pp. 961-973.
  11. Suslow V. Entry Deterrence Strategies. Journal of Industrial Organization Education, 2006, vol. 1, no. 1, pp. 1-20.
  12. Chen Y., Savage S. The Effects of Competition on the Price for Cable Modem Internet Access. Review of Economics and Statistics, 2011, vol. 93, no. 1, pp. 201-217.
  13. Pakes A. Empirical Tools and Competition Analysis: Past Progress and Current Problems. National Bureau of Economic Research, Working Paper 22086. 33 p. Available at: (accessed 10.10.2020)
  14. Yoganathan V., Osburg V., Akhtar P. Sensory Stimulation for Sensible Consumption. Journal of Business Research, 2019, vol. 96, pp. 386-396.
  15. Gravelle H., Liu D., Propper C., Santos R. Spatial Competition and Quality: Evidence from the English Family Doctor Market. Journal of Health Economics, 2019, vol. 68, 102249.
  16. Ljubownikow G., Hwee Ang S. Competition, Diversification and Performance. Journal of Business Research, 2020, vol. 112, pp. 81-94.
  17. Illanes G., Moshary S. Market Structure and Product Assortment: Evidence from a Natural Experiment in Liquor Licensure. National Bureau of Economic Research, Working Paper 27016. 34 p. Available at: (accessed 10.12.2020).
  18. Bauner C., Wang E. The Effect of Competition on Pricing and Product Positioning: Evidence from Wholesale Club Entry. International Journal of Industrial Organization, 2019, vol. 67, 102525. DOI: 10.1016/j.ijindorg.2019.102525
  19. Scheele von F., Haftor D., Pashkevich N. Cognitive Time as a Service Price Determinant: Hidden Dynamics and Price Collapse. Journal of Business Research, 2020, vol. 112, pp. 248-253.
  20. Miller K., Petrin A., Town R., Chernew M. Optimal Managed Competition Subsidies. National Bureau of Economic Research, Working Paper 25616. 65 p. Available at: (accessed 10.10.2020).
  21. Loecker de J., Biesebroeck van J. Effect of International Competition on Firm Productivity and Market Power. National Bureau of Economic Research, Working Paper 21994. 39 p. Available at: (accessed 10.10.2020).
  22. Kyle M. Strategic Responses to Parallel Trade. The B. E. Journal of Economic Analysis & Policy, 2011, vol. 11, no. 2, pp. 1-34.
  23. Reisinger M., Sauri L., Zenger H. Parallel Imports, Price Controls, and Innovation. Journal of Health Economics, 2019, vol. 66, pp. 163-179.
  24. Colangelo G., Maggiolino M. From Fragile to Smart Consumers: Shifting Paradigm for the Digital Era. Computer Law and Security Review, 2019, vol. 35, pp. 173-181.
  25. Taranukha Yu.V. Neoschumpererian testing for factors of “creative” competition: findings for Russia. Vestnik Moskovskogo universiteta. Ser. 6, Ekonomika, 2018, no. 5, pp. 21-40. (In Russ.)
  26. Gerasimenko V.V., Slepenkova E.M. Transformation of methods and instruments for competitive analysis under digital economy. Vestnik Moskovskogo universiteta. Ser. 6, Ekonomika, 2019, no. 6, pp. 126-146. (In Russ.)
  27. Taranukha Yu. Modification of competitive concept in competitive evolution. Society and Economy, 2017, no. 3–4, pp. 49-67. (In Russ.)
  28. Knyazev Yu. About competition and cooperation in contemporary economy. Society and Economy, 2018, no. 4, pp. 31-42. (In Russ.)
  29. Berry S., Gaynor M., Morton F. Do Increasing Markups Matter? Lessons from Empirical Industrial Organization. The Journal of Economic Perspectives, 2019, vol. 33, no. 3, pp. 44-68.
  30. Burguet R., Sakovics J. Personalized Prices and Uncertainty in Monopsony. International Journal of Industrial Organization, 2019, vol. 67, 102530. 29 p. Available at: (accessed 10.11.2020).
  31. Liu M., Brynjolfsson E., Dowlatabadi J. Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis. National Bureau of Economic Research, Working Paper 25015. 45 p. Available at: (accessed 10.11.2020).
  32. Gruber J., Handel B., Kina S., Kolstad J. Managing Intelligence: Skilled Experts and AI in Markets for Complex Products. National Bureau of Economic Research, Working Paper 27038. 54 p. Available at: (accessed 10.11.2020).
  33. Backus M. Why Is Productivity Correlated with Competition? National Bureau of Economic Research, Working Paper 25748. 57 p. Available at: (accessed 10.11.2020).
  34. Schmitz J. Competitive Pressure and Labor Productivity: World Iron Ore Markets in the 1980s. American Economic Review, 2002, vol. 92, no. 4, pp. 745-760.
  35. Schmitz J. What Determines Productivity? Lessons from the Dramatic Recovery of the U.S. and Canadian Iron Ore Industries Following Their Early 1980s Crisis. Journal of Political Economy, 2005, vol. 113, no. 3, pp. 582-625.
  36. Dunne T., Klimek S., Schmitz J. Competition and Productivity: Evidence from the Post WWII US Cement Industry. US Census Bureau Center for Economic Studies Paper, 2010, no. CES-WP‑10-29. Available at: (accessed 18.11.2020).
  37. Savin I.V., Mariev O.S., Pushkarev A.A. Estimation of market selection in Russia: when the size (of the firm) makes sense. Voprosy ekonomiki, 2020, no. 2, pp. 101-124. (In Russ.)
  38. Hicks J. Annual Survey of Economic Theory: the Theory of Monopoly. Econometrica, 1935, vol. 3, no. 1, pp. 1-20.
  39. Leibenstein H. Allocative Efficiency vs. “X-Efficiency”. American Economic Review, 1966, vol. 56, no. 3, pp. 392-415.
  40. Stigler G. The Existence of X-Efficiency. American Economic Review, 1976, vol. 66, no. 1, pp. 213-216.
  41. Holmstrom B. Moral Hazard in Teams. The Bell Journal of Economics, 1982, vol. 13, no. 2, pp. 324-340.
  42. Schmidt K. Managerial Incentives and Product Market Competition. Review of Economic Studies, 1997, vol. 64, no. 2, pp. 191-213.
  43. Raith M. Competition, Risk, and Managerial Incentives. American Economic Review, 2003, vol. 93, no. 4, pp. 1425-1436.
  44. Kesternich I., Schumacher H., Biesebroeck van J., Grant I. Market Size and Competition: a “Hump-shaped” Result. International Journal of Industrial Organization, 2020, vol. 70, 102605. 17 p. Available at: (accessed 10.11.2020).
  45. Feinberg R., Reynold K. An Examination of Entry and Competition Performance in Rural Banking Markets. Southern Economic Journal, 2010, vol. 76, no. 3, pp. 624-637.
  46. Abraham J., Gaynor M., Vogt W. Entry and Competition in Local Hospital Markets. Journal of Industrial Economic, 2007, vol. 55, no. 2, pp. 265-288.
  47. Xiao M., Orazem P. Does the Fourth Entrant Make Any Difference? International Journal of Industrial Organization, 2011, vol. 29, pp. 547-561.
  48. Phann G., Van Kranenburg H. Tax Policy, Location Choices, and Market Structure. Journal of Law and Economics, 2003, vol. 46, pp. 61-83.
  49. Nishida M., Gil R. Regulation, Enforcement, and Entry: Evidence from the Spanish Local TV Industry. International Journal of Industrial Organization, 2014, vol. 32, pp. 11-23.
  50. Berendt J., Uhrich S., Thompson S. Marketing, Get Ready to Rumble – how Rivalry Promotes Distinctiveness for Brands and Consumers. Journal of Business Research, 2018, vol. 88, pp. 161-172.

Registered in System SCIENCE INDEX

For citation:
Rozanova N. Contemporary Competition: Process or Result?. World Eonomy and International Relations, 2021, vol. 65, no. 8, pp. 5-13.

Comments (0)

No comments

Add comment






Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies


Current Issue
2024, vol. 68, No. 5
Topical Themes of the Issue:
  • Are There Any Ways to Break Through the Korean Nuclear Impasse?
  • Contemporary U.S. Taiwan Policy: Balancing on the Edge
  • The Gulf Monarchies’ Vision of the Global Order Transformations and the Russian Place in It
  • At Post-Soviet Space
Submit an Article
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.