Effect Of Market Concentration Research Articles

The moderating effect of seasonality in the hotel industry. Does market concentration favour tacit collusion?

Market concentration is associated with higher prices. However, previous research has not considered whether the market concentration effect on prices is moderated by seasonality in markets where firms switch from peak demand to low demand periods. This study analyzes market concentration effect on prices and price variability in the hotel industry. Through hedonic price models, the paper analyzes the influence of market concentration on hotel prices and how quality, distance to the city center or seasonality influence hotel prices. A higher market concentration is associated with higher prices. The effect of market concentration on prices is 1.7 times higher in the peak demand season than in the low demand season. Price variability between hotels for a given day in a particular market is partially explained by differences in service quality among hotels in the same city but also by the level of market concentration. We find that higher market concentration reduces price variability, a result consistent with the existence of tacit collusion.

Does Covid-19 Change the Effect of Competition on Price Discrimination in U.S. Airline Industry?

This paper seeks to examine the relationship between price discrimination and market competition before and after the outbreak of Covid-19 in the US busiest flight route, from Los Angeles airport, LAX to New York airport, JFK as a representation of the U.S. airline market. Scholars hitherto have long been focused on the effect of market concentration on price dispersion. There are two main conflicting theories that determine the relationship, the monopoly effect, and the branding effect. We analyze the air lane from Los Angeles to New York in two time periods, one from 2018 to 2020, and the other from 2020 to 2022 to see if Covid-19 changes the dominance of one effect over the other. The results of our study show that market competition has a positive effect on price discrimination during the pre-Covid period while revealing a negative effect on price discrimination after the outbreak. We conclude from the results that the branding effect dominates the LAX-JFK market before Covid-19, which means that higher competition increases the capability of a firm to charge different prices for different segments of customers whereas the monopoly effect overturns after the Covid-19 pandemic.

The Effects of Market Concentration, Trade, and FDI on Total Factor Productivity: Evidence from Indonesian Manufacturing Sector

The Effects of Market Concentration, Trade, and FDI on Total Factor Productivity: Evidence from Indonesian Manufacturing Sector

Analisis Pengaruh Tingkat Konsentrasi Pasar Terhadap Efisiensi Industri Pengolahan Besar Dan Sedang Di Jawa Timur

This study aims to investigate the effect of market concentration on industrial efficiency. Large and medium processing industry data in East Java and the Stochastic Frontier Analysis (SFA) approach were used to investigate the impact of market concentration on the efficiency of the industry. The results of the study indicate that market concentration in the processing industry in East Java leads to oligopoly. The variable of firm size (FSize) and the level of market concentration (CR4) have a negative effect on the level of technical efficiency of large and medium industries in East Java.

The effects of market concentration on health care price and quality in hospital markets in Ibadan, Nigeria

ABSTRACT Evidence about the Nigerian health indicators show that the quality of health care in Nigeria is low and inflation of health care prices also persists. Theoretically, by observing the market concentration, inferences can be drawn as to how hospitals conduct themselves, which allows the evaluation of the market performance. Therefore, the effects of market concentration on the health care price and quality were examined. Market concentration was measured by Herfindahl Hirschman Index (HHI) and four hospital concentration ratios (CR4). The values of HHI were disaggregated into the less and more concentrated markets. Quality of health care was measured by the staff-nurse-patient ratio. Ordinary Least Square (OLS) was used to estimate the effects of market concentration on price and quality of health care. The price of health care was found to be 13.4% lower in the less concentrated markets than in the more concentrated market. Income significantly and positively influenced health care prices by 17.8%. Also, a low HHI lead to 33.4% increase in Staff-nurse Patient Ratio (SPR) indicating that the quality of health care was higher in less concentrated markets as hospitals increased the treatment intensity via staff-nurse patient ratio. A less concentrated market is linked with higher health care quality and lower health care prices. Therefore, a strategy that will reduce market concentration so as to enhance consumer welfare in terms of price and quality is recommended.

The Effects of Market Concentration and Market Power on Cost Structure

The Effects of Market Concentration and Market Power on Cost Structure

Auditor Market Power and Audit Quality Revisited: Effects of Market Concentration, Market Share Distance, and Leadership

This study examines whether auditor market power is associated with audit quality. Regulators around the world have repeatedly expressed concerns about the high levels of supplier concentration, the limited number of audit suppliers in the audit market, and the potential adverse consequences of their (alleged) market power. Using U.S. data from 2009 to 2017, we examine the effect on audit quality of two competing measures of auditor market power: (a) a “traditional” market concentration measure (Herfindahl index) and (b) a competing measure derived from spatial competition theory (i.e., market share distance from the closest competitor). Following Aobdia, we infer audit quality from two measures of financial reporting quality: (a) the level of absolute abnormal accruals, and (b) the incidence of financial statement restatements. Our results indicate that industry market share distance is positively associated with audit quality, but we do not find an association between market concentration and audit quality. In addition, we find that the positive association between market share distance and audit quality only holds when the incumbent auditor is a market leader, although industry leadership itself is not significantly associated with audit quality. These findings suggest that audit quality is positively affected by a market leader’s industry market share dominance over its competitors rather than by industry specialization per se. JEL Classification: M4; L0

Are the effects of market concentration and income diversification on banking performance persistent?

We analyze the effects of market concentration and income diversification on banking performance. We used a sample of 134 countries for the period 1994-2011 and used the GMM estimator proposed by Arellano and Bover (1995). Our results show that market concentration and income diversification have a positive and non-linear effect on bank performance. The non-linearity suggests that the positive effect is reversed if the banking industry has high levels of market concentration and income diversification. During an economic crisis, the banking industry reduces diversification to support its performance. These results are relevant for the design of financial policy and banking strategies.

Price Effects of Common Ownership in the Seed Sector

We evaluate the effects of the rise of common ownership in the U.S. seed sector. Using a theoretical model, we illustrate how common ownership changes the nature of competition among firms. Our empirical analysis shows that, even when taking measures to fully separate the effects of market concentration and common ownership, a significant contributor to increase in soy, corn and cotton seed prices over the 1997-2017 period is the rise of common ownership. These findings contribute to the current literature regarding the anticompetitive effects of common ownership and confirm the result of studies performed in other sectors, such as airlines.

The effect of market concentration on total welfare and its distribution in a supply chain case

The concentration of industries affects the total welfare of the economy and changes its distribution among all economic agents. This paper examines an entire supply chain that includes multiple stages within the cheese industry. It presents the effect of market concentration levels on prices, quantities, profits, consumer surplus and the total welfare of all sectors involved in the production and consumption processes. Since increased concentration may lead to a higher degree of inequality, the relationship between inequality and efficiency is investigated. These issues are demonstrated by using a simplified structure of the cheese industry.

Non-monotonic effects of market concentration on prices for residential solar photovoltaics in the United States

Emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share. The effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic (PV) systems in the United States. A novel hypothesis is explored that the effects of market concentration may be non-monotonic. Prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power. The results of an econometric model provide evidence to support the non-monotonic hypothesis. However, the data suggest that the relationship between prices and firm scale is nuanced, and that both large- and small-scale PV installers may wield efficiency advantages.

The effects of market concentration on costs of local public services: empirical evidence from Dutch waste collection

ABSTRACTDifferent concentration indexes are calculated for the Dutch waste collection market and all show that this market was highly concentrated in 2002, 2006, 2010 and 2014. The estimation results in 2002 show that private collection is cheaper but high concentration increases costs of private collection and therefore (partly) offsets the advantage of contracting out. In 2006, the savings gained from privatisation and also the effect of concentration disappear, probably due to the introduction of a VAT-compensation fund. In 2010, for an area with a radius of 30 km, high concentration increases costs, but for larger areas, this effect mostly disappears. For 2014, in most estimations, this concentration effect disappears. If we include fixed effects for a panel, the cost advantage of inter-municipal cooperation is larger than that of private production and concentration effects also disappear. Overall, these estimation results are rather independent of the concentration indexes used, if we investigate several indexes as an alternative for the Herfindahl–Hirschman index.

Market Share Matters: Evidence Of Insurer And Provider Bargaining Over Prices.

Proposed mergers among large US health insurers and growing consolidation among providers have renewed concerns about the effects of market concentration on commercial health care prices. Using multipayer claims for physician services provided in office settings, we estimated that-within the same provider groups-insurers with market shares of 15percent or more (average: 24.5percent), for example, negotiated prices for office visits that were 21percent lower than prices negotiated by insurers with shares of less than 5percent. Analyses stratified by provider market share suggested that insurers require greater market shares to negotiate lower prices from large provider groups than they do when negotiating with smaller provider groups. For example, office visit prices for small practices were $88, $72, and $70, for insurers with market shares of <5percent, ≥5 to <15percent, and ≥15percent, respectively, whereas prices for large provider groups were $97, $86, and $76, exhibiting a continued decrease across higher insurer-market-share categories. These results suggest that mergers of health insurers could lower the prices paid to providers, particularly providers large enough to obtain higher prices from insurers with modest market shares. Continued monitoring will be important for determining the net effects of the countervailing trends of insurer and provider consolidation on the affordability of health care.

Market concentration, diversification and bank performance in China and India

Purpose The purpose of this paper is to examine the operational efficiency and effects of market concentration and diversification on the efficiency of Chinese and Indian banks in the 1997-2011 period. Design/methodology/approach This study employs the two-stage bootstrap procedure of Simar and Wilson (2007) to obtain valid inferences on the efficiency scores and the efficiency determinants. Findings Using data set for each country separately, the authors found that the bias-corrected cost efficiency displays an upward trend in Chinese and Indian banks. This trend is consistent with profit efficiency among Chinese banks, but the trend is unclear in Indian banks. Market concentration is negatively related to cost and profit efficiencies of Chinese banks. However, market concentration is positively associated with cost efficiency, but unrelated to profit efficiency of Indian banks. In Chinese banks, diversification of revenue, earning assets and non-lending earning assets are associated with increasing profit efficiency, but their effects to cost efficiency are not clear. In Indian banks, diversification of earning assets increases profit efficiency while there are cost efficiency losses from diversification of revenue and earning assets. Practical implications Bank regulators and supervisors in China should consider establishing policies to reduce market concentration and encourage diversification of revenue, earning assets and non-lending earning assets, while increasing concentration and diversification of earning assets should be encouraged in Indian banks. Originality/value To the best of the authors’ knowledge, this is the first study employing the double bootstrap procedure proposed by Simar and Wilson (2007) which can address the problem of the two-stage data envelopment analysis or SFA estimator in the efficiency literature on Chinese and Indian banks that efficiency scores obtained in the first stage are inter-dependent, and hence violating the basic assumption in regression analysis in the second stage.

Trademark or patent? The effects of market concentration, customer type and venture capital financing on start-ups’ initial IP applications

We analyse the initial IP applications of 4,703 start-ups in the U.S., distinguishing between trademark and patent applications. Our empirical results show that start-ups are more likely to file for trademarks instead of patents when entering markets with a higher market concentration. Furthermore, we find that start-ups that are primarily active in business-to-consumer markets instead of business-to-business markets are more likely to file trademarks. Finally, the involvement of a venture capitalist (VC) affects the initial IP application. VC-backed start-ups are more likely than other start-ups to file initial IP in the form of trademarks rather than patents. This paper contributes to research on the use of IP rights in start-ups and to the literature on new venture strategy.

Regulation, Supervisiin and Accounting Conservatism in Banks

The main purpose of this article is to evaluate the effects of the three pillars of Basel II, i.e. bank regulation, supervision and market discipline, on the timeliness of loan loss provisioning by banks. In particular, we analyze explicitly how regulatory and supervisory regimes interact with the market discipline measures, such as listing status, ownership and market concentration. Using a sample of 14,651 bank-year observations covering 54 countries over the period 1997-2009, we provide empirical evidence suggesting that a) the stringency of the regulatory and supervisory regimes is positively associated with accounting conservatism; b) unlisted banks and commercial banks are more conservative than listed entities and savings banks, respectively; and c) banks operating in more concentrated markets exhibit a lower degree of timeliness in loan loss recognition. In addition, our results suggest that strong capital requirements mitigate the effect of market concentration and governance on accounting conservatism, whereas strict regulatory regimes tend to reinforce the effect of both variables on early loan loss recognition.

Market structure, institutional framework and bank efficiency in ASEAN 5

This paper aims to examine the mediating role of institutional framework on the effect of market concentration towards bank efficiency in the ASEAN-5. We adopt a two-stage methodology using the Slack-Based Measures Data Envelopment Analysis and the system Generalized Method of Moments, and focus on the post-Asian Financial Crisis period which saw major banking consolidation in the region. Our findings are consistent with economic theory which suggests that higher bank concentration reduces the efficiency level of commercial banks. Nevertheless, better institutional framework – as proxied by greater foreign ownership, political stability and regulatory quality – plays a significant mediating role to improve bank efficiency level even when the banking industry is highly concentrated. This presents an important policy implication in light of the ongoing trend of banking consolidation which results in higher industry concentration.

The Effect of Market Concentration of Banking Industry on SMEs’ Financing Behavior and Operating Performance

The Effect of Market Concentration of Banking Industry on SMEs’ Financing Behavior and Operating Performance

Wages, Profitability and Market Structure: Threshold Regression Analyses

This paper employs threshold regression techniques to examine the effect of product market structure on real wages and profitability. Using longitudinal data on Turkish manufacturing industries over the period of 1985-2001, we show that market concentration has positive effects on wages and profitability. The positive effect of market concentration on wages is only significant over a certain threshold level whereas, the positive effect of market concentration on profitability exists in both regimes determined by a lower threshold level of concentration but weakens over this threshold. Our results suggest that the imperfectly competitive structure of Turkish manufacturing industry offers more monopoly rent to employers than employees.

Competition in Retail Gasoline Markets

We study the relationship between prices and market structure in geographically isolated markets that are exposed to large demand shocks. The temporal variation in market size allows us to overcome the classical endogeneity bias in standard concentration-performance regressions. We find evidence of local market power in gasoline markets due to product differentiation. Additionally, the high margins that characterize concentrated markets dissipates quickly with the number of competitors. Ignoring market structure endogeneity leads to underestimating the effect of market concentration on prices between 55 and 70 percent.