Competition Prospects in Regulated Market of a Baltic Country

Abstract

The author examines competition prospects in the regulated market of a selected EU country to investigate specific policy choices. Under full market regulation, the actors have the exclusive right to deliver economic transactions. (1) Literature review: The theoretical part starts with the presentation of actors’ heterogeneity and their market competition. (2) Methods: During empirical research, the author revised the cost structure and tested assumptions of the new trade theory of heterogenous firms and the impact of this heterogeneity on actors’ competition. The author formed a three-step methodology where at the beginning, the actors are described, then a regression model is formulated, and volumes of delivered services are analyzed. In the end of this study, the author investigated if the costs of regulated market participants are characterized by the distribution of Pareto and analyzed the gaps between regulated prices and the level of costs. The author applied Pareto distribution and LS regression methods in the study. (3) Results: Although the author found that the market participants in the market concerned are very different, their distribution according to the Pareto distribution function could not be confirmed. (4) Conclusions: The study shows that competition prospects in a regulated market differ. This is proven by analyzing the impact of this heterogeneity on actors’ competition. These results are essential in formulating the suggestion of economic policy.