Page 10 - Azerbaijan State University of Economics

Adalat J. Muradov, Nazim Ö. Hajiyev: Analytical frameworks and procedures for application of
demonopolization

the enterprise’s products belong, are chosen (in case only if these goods are identical substitutes

and are hypothetically offered with prices close to production expenses). Or if prices are

hypothetically close to production expenses, a decision may be made on functionally identical

degree of products for customers.

Prices of other products across the country may influence on the size of the limited market

in regard to analysis of approaches to non-nationalization as well. For instance, two borrow-pits

located at 100 km to each-other can offer enough substitutes to clients (if forwarding charges by

railway and motorway are low enough), but when transport expenses are high, as a mutual

alternative, these borrow-pits become irrelative. It is clear that, when determining the limited

markets, expected future prices should be fixed considering the level of these markets; moreover,

it may be impossible to give precise prediction under emerging market economy.

3. Is demonopolization necessary for development of competition?

The second significant step in analysis of demonopolization is to address an issue on

whether to monopolize or demonopolize the enterprise in general. As there are relevant limited

markets defined, the following question should be posed in each of these markets – is

demonopolization necessary for development of competition? It may be that competition level

does not increase sufficiently subsequent to the fragmentation of the enterprise, as the enterprise

will face a critical competition with foreign suppliers or new market participants anyway

[Brusick P. 2008]. On the other hand, perhaps, the enterprise is a natural monopoly in its own

market. In this case, demonopolization will lead to increase of production expenses of the

enterprise compared to its initial production expenses. Regulatory measures should be viewed as

alternatives to demonopolization in cases where market entry barriers protect the monopolist.

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