Markets wanted: expectation overshooting in transition economies

This paper analyzes and compares individual beliefs about the effects of competition and the evolution of those beliefs over time in transition economies and experienced market economies. At the onset of transition, competition beliefs in transition countries are far more positive than in experienced market economies. Over time, this difference vanishes and competition beliefs converge. It is argued that overly optimistic competition beliefs in transition countries contributed to the possibility of implementing far-reaching pro-market reforms. It is shown that competition beliefs positively affect support for economic reform.