Determinants Of Market Structure Research Articles

Exploring the Interactive Relationship between Retailers’ Free Shipping Decisions and Manufacturers’ Product Sales in Digital Retailing

In the realm of multichannel digital retailing, free shipping has gained popularity as a promotion strategy. However, few studies have investigated how retailers make decisions regarding free shipping. Furthermore, concerns have arisen regarding the sustainability of free shipping promotions for manufacturers. This research employs a simultaneous equation model with fixed effects to explore the determinants of market structure concerning the proportion of retailers offering free shipping and its impact on manufacturers’ product sales. As per our current knowledge, this research is pioneering in establishing a causal relationship between the percentage of free-shipping retailers and manufacturers’ product sales. Specifically, an increase in the percentage of retailers employing free shipping leads to higher product sales, while lower product sales drive increased retailers to adopt free shipping. Our findings indicate that competition among products has a significant positive effect on the percentage of retailers offering free shipping in the interactive relationship. Furthermore, increased competition among retailers results in more retailers adopting free shipping strategies. These results affirm the efficacy of free shipping as a promotional approach to increase manufacturers’ product sales, particularly in highly competitive markets.

An Econophysical Approach for the Market Structure Determination of an Industry: An Extension of Robert Bishops Formula

An Econophysical Approach for the Market Structure Determination of an Industry: An Extension of Robert Bishops Formula

Determinants of Market Structure and Demand: A Panel Data Study on Turkish Airports

The aim of this research is to reveal the factors that determine the number of airlines at the airport and the demand for the market. In addition, another objective of the research is to reveal the market structure and the changes in the market structure using concentration measurement tools is another research purpose. The twenty-eight airports in Turkey were examined by panel data analysis between the years 2007-2018. Regarding the market structure in general, decreases have been observed in the concentration values over time. In other words, airports have become more competitive over time. The panel data results show that the number of airlines at airports is strongly influenced by the number of passengers in the relevant market, the city’s GDP, the number of university students, the number of visitors, and the hub airport. On the other hand, it is evident that the number of airline carriers operating in the relevant market, the city’s GDP, its population, the number of university students, the presence of a hub airport, and the number of tourists have a substantial impact on the demand at airports. Results obtained in this research will contribute to the literature by providing new models of market structure and demand. It is thought that the research will guide airline companies and airport managers in terms of predicting demand. Key Words: Airports, Panel Data, Air Travel Demand, Market Structure, Competition. JEL Classification: L11, L93, R41

Differentiation and pricing strategies for hotels in sun and beach destinations

This paper develops a theoretical model for oligopolistic competition in the hotel industry for sun and beach destinations. The aim of the model is to identify in which cases the market structure is biased towards luxury hotels with high‐quality investment levels or towards medium and low‐quality hotels with cheaper prices. The willingness to pay and the number of customers in each income‐level segment and hotels' location are the most relevant factors in understanding the market structure. These determinants of market structure are relevant not only for market participants but also for policymakers with responsibilities in designing tourism policies.

Market structure determinants of performance for independent supermarkets

We create a novel dataset by merging Nielsen TDLinx data with the results of a survey of supermarket managers. We study the determinants of store performance for independent supermarkets, as measured by sales per square foot, paying particular attention to local market structure. The results show a negative and significant impact of market concentration on independent supermarket performance, which is robust to model specification. We also identify a number of format‐specific impacts and performance drivers such as store characteristics, all of which motivate future research.

Stackelberg equilibrium with many leaders and followers. The case of zero fixed costs

I study a version of the Stackelberg game with many identical firms in which leaders and followers use a continuous cost function with no fixed cost. Using lattice theoretical methods I provide a set of conditions that guarantee that the game has an equilibrium in pure strategies. With convex costs the model shows the same properties as a quasi-competitive Cournot model. The same happens with concave costs, but only when the number of followers is small. When this number is large the leaders preempt entry. I study the comparative statics and the limit behavior of the equilibrium and I show how the main determinants of market structure interact. More competition between the leaders always displaces the followers. Instead, how a stronger threat of entry affects the equilibrium depends on the technology. With strictly convex costs it is the followers that eventually displace the leaders.

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

The economic crisis that began in 2008 highlighted the difficulties faced by those national economies members of a monetary area. Such is the case of the countries in the euro area. In this situation, the possibilities of increasing the international competitiveness of the domestic economy are severely reduced. This paper presents a theoretical analysis of the fundamentals of real exchange rate and the factors influencing pricing, focusing on the degree of competition in the markets and the cost structure. It is undertaken through the study of maximising corporate profits, formation of labour costs and determinants of market structure, contextualised in a currency area. The findings clearly show that there are efficient policies that can be applied in order to increase domestic competitiveness through internal devaluation; nevertheless, the results show that a loss of purchasing power of workers will probably be the result, while corporate profit margins grow.

Sunk Costs, Entry, and Exit in Dynamic Oligopoly

This paper develops a dynamic econometric framework for the analysis of entry, exit, and competitive conduct in oligopolistic markets. This framework only requires panel data on the demand and producer counts of geographically dispersed markets over time. It is a dynamic extension of Bresnahan and Reiss's (1990, 1991) framework for the analysis of static competition in a cross-section of markets. Our extension to the infinite-horizon model facilitates the empirical analysis of the dynamic determinants of market structure and competition: sunk entry costs and uncertainty. Moreover, it is needed for the consistent measurement of static market primitives, such as the toughness of competition. Our model's timing and expectation assumptions help to select an essentially unique Markov-perfect equilibrium that can be computed quickly by solving a finite sequence of dynamic programming problems with low-dimensional state spaces. We apply our model to the empirical re-analysis of sunk costs and the toughness of competition in the US market for dental services, using Bresnahan and Reiss's (1993) panel data on the number of dentists across geographical markets in the US.

MARKET STRUCTURE AND INTENSITY OF PRICE COMPETITION IN EU BANKING

This article analyzes both determinants of market structure and the intensity of price competition in the European Union (EU) banking industry. For this purpose, the first part of the article applies John Sutton's framework for empirically measuring the relationship between market size and market concentration. Next, the analysis turns to assessing the degree of price competition by applying a method of measuring banking competition that I have recently developed. Results suggest that there is a null relationship between market size and concentration, and that the estimated lower bound to concentration is well above zero. These two pieces of empirical evidence support Sutton's endogenous sunk costs model. Moreover, empirical estimates of a measure of competition—distance to the lower bound to concentration—suggest that the majority of EU national banking markets have low intensity of price competition. In contrast, Estonia, Netherlands, Finland, and Lithuania appear to have the most competitive banking industries.

Innovation and Market Structure in Pharmaceuticals: An Econometric Analysis on Simulated Data

Summary The contribution of this paper is twofold. First, it presents the results of a “history-friendly” simulation model of evolution of the pharmaceutical industry. Second, it aims at contributing to a more general methodological discussion about agent-based models by proposing an econometric analysis of the results of the simulations. The case of the pharmaceutical industry has been studied extensively by scholars because, despite the high level of R&D intensity, the industry has been characterized by a relatively low levels of concentration. The model is able to reproduce the main stylized facts of the industry in an evolutionary perspective. In this paper we extend the analysis conducted in two previous works (Garavaglia et al. 2012, 2013) by further qualifying the findings with an extensive econometric investigation of the model outputs. The paper focuses the attention on the determinants of market structure, the innovative performance of the industry, the diversification in multiple submarkets and the level of prices. We find that the properties of the technological and demand regimes are key determinants of the patterns of industry evolution and that the main mechanisms driving the model are the random processes of search, the discovery of new submarkets as well as the interactions between patent protection, imitation and price competition. In addition, this paper emphasizes how the emerging leaders in the industry are those innovative early entrants which entered in large submarkets, showing the importance of the first mover advantage and of the size of the “prize” accruing to innovators when they discover a new rich submarket.

Predicting Merger Outcomes: How Accurate are Event Studies, Market Structure Determinants and Agency Decisions

Merger analysis is an exercise in prediction. This paper analyzes the accuracy of two leading methods of predicting merger outcomes – stock market event studies, and a market-structure/Merger Guidelines approach – as well as the accuracy of antitrust agencies’ decisions whether or not to challenge mergers. The basis for these evaluations of accuracy is a data base of actual price effects of some forty mergers compiled from published merger retrospectives. This paper finds that event studies systematically underpredict the incidence of anticompetitive outcomes, while market structure criteria overpredict competitive problems. Since market structure serves primarily as an initial screen for agency analysis,initial over-inclusiveness may be the optimal first stage of the process of policy determination.

Entry Regulations, Product Differentiation and Determinants of Market Structure

We use a dynamic oligopoly model of entry and exit with store-type differentiation to evaluate how entry regulations affect profitability and market structure in retail. Based on unique data for all retail food stores in Sweden, we find different cost structures and asymmetric competition across store types. Two additional small stores correspond to the same decrease in a small store's long-run profits as one large store. A number of counterfactual experiments that target the entry of different store types and markets with various degrees of regulation provide rich information for policymakers concerning the effect of regulations on market structure dynamics.

Entry, exit, and the determinants of market structure

This article estimates a dynamic, structural model of entry and exit for two US service industries: dentists and chiropractors. Entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short‐run price competition are important determinants of long‐run firm values, firm turnover, and market structure. In the dentist industry entry costs were subsidized in geographic markets designated as Health Professional Shortage Areas (HPSA) and the estimated mean entry cost is 11 percent lower in these markets. Using simulations, we find that entry cost subsidies are less expensive per additional firm than fixed cost subsidies.

Equilibria of dynamic games with many players: Existence, approximation, and market structure

In this paper we study stochastic dynamic games with many players; these are a fundamental model for a wide range of economic applications. The standard solution concept for such games is Markov perfect equilibrium (MPE), but it is well known that MPE computation becomes intractable as the number of players increases. We instead consider the notion of stationary equilibrium (SE), where players optimize assuming the empirical distribution of others' states remains constant at its long run average. We make two main contributions. First, we provide a rigorous justification for using SE. In particular, we provide a parsimonious collection of exogenous conditions over model primitives that guarantee existence of SE, and ensure that an appropriate approximation property to MPE holds, in a general model with possibly unbounded state spaces. Second, we draw a significant connection between the validity of SE, and market structure: under the same conditions that imply SE exist and approximates MPE well, the market becomes fragmented in the limit of many firms. To illustrate this connection, we study in detail a series of dynamic oligopoly examples. These examples show that our conditions enforce a form of “decreasing returns to larger states;” this yields fragmented industries in the SE limit. By contrast, violation of these conditions suggests “increasing returns to larger states” and potential market concentration. In that sense, our work uses a fully dynamic framework to also contribute to a longstanding issue in industrial organization: understanding the determinants of market structure in different industries.

Entry, Exit, and the Determinants of Market Structure

Entry, Exit, and the Determinants of Market Structure

STRUKTUR PASAR MINYAK KAYU PUTIH (MELALEUCA LEUCADENDRON OIL) (Studi Kasus di Kecamatan Namlea Kabupaten Buru–Maluku)

In Indonesia, Melaleuca leucadendron Oil is only produced in several regions, including the District of Buru, Ambon, Seram, New Guinea, Java, and Borneo. This condition is a good opportunity to develop Agro Oil White Wood, White Wood Oil Agro-industry presence in the operations must be taken to ensure that producers are able to survive in a market situation that took place, so hopefully will create an effective and efficient market. This study aims to analyze the structure of eucalyptus oil agro-industry market. Determiningthe location of the research done by purposive (deliberately) that is in the Regency of Buru as the largest producer of eucalyptus plants in the Moluccas. Data analysis methods used were qualitative (descriptive) and quantitative analysis. Descriptive analysis is used in the determination of market structure include the degree of product differentiation, barriers to market entry, and the level of market knowledge and determination of market behavior including pricing policies, institutional system of market and marketing functions. The quantitative analysis used to determine the degree of market concentration that is measured market share. The results of this study indicate that the market structure of Melaleuca leucadendron Oil agro-industry in the regency of Buru including in markets characterized by monopolistic competition there are many sellers in the market with the same basic product but have been differentiated. From the results of existing research suggested that Melaleuca leucadendron Oil industry need to consider the market structure in determining the price. Melaleuca leucadendron Oil agro need to increase production and marketing activities by creating the uniqueness of the diversification of products so that manufacturers can increase revenue and avoid market saturation.

Equilibria of Dynamic Games with Many Players: Existence, Approximation, and Market Structure

In this paper we study stochastic dynamic games with many players; these are a fundamental model for a wide range of economic applications. The standard solution concept for such games is Markov perfect equilibrium (MPE), but it is well known that MPE computation becomes intractable as the number of players increases. We instead consider the notion of stationary equilibrium (SE), where players optimize assuming the empirical distribution of others’ states remains constant at its long run average. We make two main contributions. First, we provide a rigorous justification for using SE. In particular, we provide a parsimonious collection of exogenous conditions over model primitives that guarantee existence of SE, and ensure that an appropriate approximation property to MPE holds, in a general model with possibly unbounded state spaces. Second, we draw a significant connection between the validity of SE, and market structure: under the same conditions that imply SE exist and approximates MPE well, the market becomes fragmented in the limit of many firms. To illustrate this connection, we study in detail a series of dynamic oligopoly examples. These examples show that our conditions enforce a form of “decreasing returns to larger states”; this yields fragmented industries in the limit. By contrast, violation of these conditions suggests “increasing returns to larger states” and potential market concentration. In that sense, our work uses a fully dynamic framework to also contribute to a longstanding issue in industrial organization: understanding the determinants of market structure in different industries.

Consolidation by merger: the UK beer market

This paper examines the determinants of market structure in the UK brewing industry over 1949–1969. Sutton (Sunk costs and market structure: price competition, advertising, and the evolution of concentration, 1991) points to technology and advertising races as two key drivers of market concentration. This study uses an own-built longitudinal data set of the population of firms and breweries, and reveals the importance of institutional factors in explaining the dynamics of market structure. The practice of tying outlets to brewers and legal restrictions on opening retail outlets, together with a permissive policy towards mergers, made acquisition of medium-sized firms and brewery closure (shortly after acquisition) the main driving mechanism towards industry consolidation. During this period, the number of firms and plants fell sharply (by 74% and 60%, respectively) and production rose (by about 25%), with no firm entry and just one new brewery opening. As a result, concentration increased and the market transformed from a highly fragmented one into a stable oligopoly.

Demand competition and investment heterogeneity in industries based on systemic technologies: evidence from the US long-distance telecommunications services industry, 1984–1996

Industries based on systemic technologies are often characterized by a dynamically evolving market structure. The market structure that provides the context for firms’ investment choices itself evolves due to the feedback effect of firms’ investments. In such cases, analyses of investment-performance relationship, purporting to explain sustainable competitive advantages, should ideally account for the endogeneity of the determinants of market structure—technology, demand, and policy—and firms’ investment choices. This paper focuses on the endogeneity of the demand-side determinants of market structure and firms’ demand-side investments under the assumed conditions of constant technology and policy environment. In doing so it contradicts the extant depiction of the evolution of industrial market structure in the above context as primarily caused by the evolution of underlying technological system in response to firms’ endogenous technological investments that generate sustainable competitive advantage for the dominant firms. A dynamic evolutionary model of demand competition captures the competition in the downstream market for basic industry product and its complements in an industry based on systemic technology during its post-interoperability stage. A natural experiment drawn from the US Long-distance telecommunications services industry during 1984–1996 allows testing the hypotheses drawn from the above model in a panel data setting.

Entry, Exit and the Determinants of Market Structure

Entry, Exit and the Determinants of Market Structure