Corporatist economy, inefficient but stable
A corporatist economic systems can perpetuate economic inefficiency thanks to its inherent stability. This is what Aldo Montesano (Università Bocconi) demonstrated in the paper Price collusion with free entry: the parasitic competition presented at the Bocconi Symposium on Economic Theory.
Montesano analyzes an industry where there's collusion among producers. They set the market price, but can't prevent the entry of other firms. "The model," says Montesano, "gives an analytical portrait of productive activities that are organized in corporations (thus enjoying price-setting powers) in a context where there is freedom of entry".
The Italian economist considered both homogenous and differentiated products. In comparison with other market regimes, a corporatist system without insurmountable barriers to entry determines a selling price that is higher than in a competitive system and less than or equal to that of a monopolistic regime. On the other hand, the quantity of production per producer is lower than in competitive and monopolistic firms. However, such system enables the activity of a very large number of firms. Such property makes corporativism socially stable. A deviation from the corporatist systems would bring a reduction in the number of firms. However, from the point of view of economic efficiency, a corporatist industry can be even worse than full-fledged monopoly.
The two-day symposium saw the participation of several Italian scholars, many operating abroad. Among the researchers presenting their papers along with Montesano's: Sandro Brusco (Stony Brook University), Massimo Marinacci (Università di Torino, Collegio Carlo Alberto) e Manuel Santos (School of Business, University of Miami), Michele Boldrin (Washington University in St Louis), Francesco Giovannoni (University of Bristol), Luigi Montrucchio (Università di Torino, Collegio Carlo Alberto), Marco Ottaviani (Kellogg School of Management), Nicola Persico (New York University) and Pietro Veronesi (University of Chicago, Booth School of Business).