Existence Of Market Power Research Articles

What drives equipment manufacturing enterprises green technology innovation in the Yangtze River Economic Belt? A configuration analysis based on DEA-fsQCA model

Under the dual backdrop of the “dual-carbon” goal and the strategic goal of "Made in China 2025", the equipment manufacturing industry, as the "industrial mother machine", has to undergo a green, low-carbon transformation. Green technology innovation is an essential component of achieving green transformation. Therefore, their green technology innovation efficiency (GTIE) deserves in-depth examination to achieve the "double carbon" goal. The aim of this study is to reveal the possible paths and models for equipment manufacturing enterprises to obtain high GTIE from a configuration perspective. Based on 94 listed equipment manufacturing companies' green technology innovation data in the Yangtze River Economic Belt (YREB) from 2018 to 2021, this paper explores the GTIE and its combination improvement path with a DEA-fsQCA model. The results indicate that: (1) The average efficiency score of the sample was 0.506, only 16 enterprises reached the production frontier, and the overall GTIE in equipment manufacturing industries as a whole showed a "first drop and then a steady upward" trend from 2018 to 2021; (2) The results of heterogeneity analysis revealed that the level of GTIE showed a characteristic of the upstream region > downstream region > midstream region, foreign-invested enterprises > private-owned enterprises> state-owned enterprises, and there is significant industrial heterogeneity, with a GTIE difference of up to 0.478 between the industries with the strongest green technologys innovation ability and those with the weakest. (3) A single conditional variable cannot constitute the necessary condition for high GTIE. There are four combination paths that can produce high GTIE: PCW+ MP-dual driven, PCW+ Fin-dual driven, COCEN-oriented, and COCEN+MP-dual driven. Further analysis shows that there is a substitution effect between the absence of the financing constraint and the existence of market power. This study provides a scientific basis for facilitating the improvement of YREB's equipment manufacturing industry's green technology innovation capabilities.

Estimating oligopsonistic market power in Uganda’s rice industry

ABSTRACT The study applies the conjectural variations approach to determine whether Ugandan rice traders exercise oligopsony power in the market for domestic rice. The trader margin for milled rice is found to be 10.20% on average. Using an econometric system of four equations, the null hypothesis of competitive behaviour holds at different price elasticities of farm supply, ranging from inelastic to elastic supply. This implies that there is no evidence that rice traders apply oligopsony power when procuring milled rice from farmers. However, since the study does not examine the existence of trader bargaining power, we cannot completely rule out the existence of market power at this node of the value chain. Therefore, future studies should examine trader bargaining power to be able to ultimately determine if there is need to intervene at this segment of rice value chains to ensure competitive behaviour.

Multi‐unit ownership and market power: A study of the lodging industry in Texas

AbstractAs franchisees in the retail and service industries become experienced and acquire local market knowledge, they are likely to own multiple franchised units. Given non‐ (or weak) exclusive clauses in franchising contracts or industry norms, some of these multi‐unit owners are affiliated with multiple franchisors. Agency and transaction cost theories, the classic theoretical framework to analyze franchising, cannot explain this type of multi‐franchisor affiliation because this type of ownership would create incentive problems across franchisors. Conversely, this paper investigates whether this type of the multi‐unit ownership can be explained by the exercise of market power by these franchisees. We test this hypothesis in geographically clustered markets (hotels near the interstate highway exits), where multi‐unit ownership is common. We first show that multi‐unit owners affiliated with multiple franchisors charge higher prices than other franchisors. Then, in our main analysis, we show that one explanation for this pattern is the existence of market power: Without multi‐unit ownership, prices at these hotels would decrease by 9%, on average (and market‐level volume sales would increase by 7.52%). These results help explain why franchisors might be willing to engage in franchising contracts with franchisees that operate units associated with different franchisors.

Borrowing Power from Potential Entrants and High-Speed Rail: Entry Pattern of China’s Low-Cost Carrier

This paper investigates the impact of market structure and high-speed rail on China’s low-cost carrier Spring Airlines’ entry patterns during the pre-pandemic period. Dividing the air transport system into discrete distance segments (i.e., short-, medium- and long-haul) helps better reveal critical factors that affect the route entry of Spring. Given the existence of market power in China’s airline industry and the capacity constraints at major airports, Spring strives to enter routes that can accommodate more potential entrants without a strong response from incumbents and are connected with more concentrated or lower-capacity airports. The complementary and competition effects of high-speed rail are well-distinguished in different distance ranges.

Modelling the spatial and sectoral benefits of productivity enhancing innovations using a transport oriented multiregional IO framework: the ‘megatruck’ in Spain

We render operational the model outlined by Carter (1990) via the introduction of the research methods necessary for studying the spatial and sectoral (upstream and downstream) benefits of productivity-enhancing innovations within a real interregional input–output framework. As case study we examine the reduction in production costs derived from the adoption of longer and heavier vehicles in freight road transportation. We exploit a new Spanish regional table including a detailed disaggregation of the transportation sector. The productivity gains at the national level, resulting from a 30% reduction in transport costs, amount to 2.95% of the GVA at market prices. Results show that firms operating in this niche market appropriate most of the gross operation surplus (which increases by 10%), consistent with the existence of market power. The remaining transportation sectors see profits slightly worsened, suggesting limited substitution effects. A high regional heterogeneity exists because of the different input–output structures.

Strategic bidding of distributed energy resources in coupled local and central markets

This paper explores a revenue maximization problem for distributed energy resources in a local day-ahead and balancing market. The local market creates opportunities for competition among distributed energy resources, however it may also lead to exercising market power. In the day-ahead market, the strategic revenue maximization of the distributed energy resources is modelled through a bi-level optimization. The upper-level in the bi-level optimization is from the strategic distributed energy resource’s perspective and the lower-level problem is from the local market operator’s perspective. The balancing market (where there is perfect competition) is modelled by the shrinking rolling horizon approach. A wind farm with a storage system is considered as a case study of a strategic distributed energy resource to evaluate its profitability within the proposed revenue maximization problem. The revenue of the wind farm in the local market is compared with the one in a (business-as-usual) centralized market where it cannot exercise market power. Sensitivity analysis regarding the effect of changing the distribution system parameters e.g. the branch resistances and the loads, on the revenue of the wind farm and its bidding behaviour is performed. Moreover, the role of the storage system on the revenue of the wind farm is studied. Results show that an overloaded or weak distribution system will positively influence the strategic position of the wind farm. Finally, it is shown that depending on the existence of market power, a storage system can bring extra revenues for the wind farm, by hedging against its uncertain output. • Formulation of a bi-level shrinking horizon bidding strategy for DERs in local markets. • Application of the bidding strategy problem to a combined wind and storage system. • A comparison between DER revenue in the local market versus the centralized market. • Study of distribution network parameters on DER’s ability to exercise market power. • Paper shows the application of market power in the local market.

Transaction Costs and Competition Policy

This paper studies how current competition policy should be altered in order to take into account our understanding of how transaction costs influence the ability of firms and consumers to deal with market power. Ever since Coase (1937) first established the importance of transaction costs to understand the theory of the firm, the study of transaction costs has been central to understanding several aspects of firm organization. Coase’s article (1960) on social costs underscored the importance of transaction costs in understanding why certain externalities exist. There has been a large literature exploring externalities and their relation to transaction costs in the field of public finance. There has been no corresponding literature in the field of competition policy despite the fact that a distortion of competition is an externality. The externality that competition authorities typically study is the one caused by the gap between price and marginal cost that arises from the existence of market power. Surprisingly, antitrust scholars have not spent as much time as warranted to think through how transaction costs should affect an assessment of market power and competition policy. This paper aims to fill that gap. The paper shows how current thinking about horizontal mergers, vertical mergers and vertical restrictions, Nash-in Nash bargaining models, two-sided markets, and control of data all need to be modified if one wants to avoid incorrect competition policy prescriptions.

Bank Market Power and Firm Finance: Evidence from Bank and Loan Level Data

We present new measures of market power for the banking industry in Colombia and estimate their effect on the cost of credit for non-financial firms. Our results suggest that bank competition increased during the 2006-2008 period–even as concentration increased–but decreased thereafter. Using a unique combination of loan, firm and bank-level datasets we are also able to show that banks loosing overall market power–measured by the average price-cost margin–decrease interest rates to small firms, but increase rates to firms with which they have the oldest credit relationships. This suggests (i) the existence of market power that is specific to the bank-firm relationship (i.e., informational lock-in and hold-up problems due to switching costs), and (ii) that size may be capturing other firm attributes such as observable risk, scale effects or implicit collateral.

When Best Effort is Not Good Enough: Incomplete Contracting, Risk Allocation, and Demand for Consumer Protection in the Market for Broadband Access Services

Starting from a luxury available to small networks of relatively high-income users, high-speed access to the open Internet has become a necessity for social and economic participation of individuals, competitiveness of business, and economic development. In the transition of broadband from a luxury to a necessity over the past two decades, “best effort” retail contracts (i.e. up to xMbps, subject to varying network conditions) have provided Internet service providers (ISPs) with significant flexibility in managing scarce capacity in response to growing consumer demand for network resources. Over time however, the emergence of a wide variety of advanced Internet applications that require reliable high-speed connectivity (i.e. minimum effective bandwidth/speed, Quality of Service (QoS) guarantees) has stimulated the development of a wide range of network management technologies that enable the delivery of quality of service guarantees and fine-grained service quality and price differentiation (e.g. across applications, senders, users). The combination of these factors has led to the development of a multi-tiered Internet in which scarce capacity is bifurcated into a basic best effort access path to the open Internet and a luxury class of prioritized/sponsored services on the same physical infrastructure. From an economic perspective, mitigating negative externalities from growth in the “fast lane” on best effort “slow lanes” in this differentiated broadband ecosystem have emerged as a seemingly intractable challenge in countries that are further behind in the transition from legacy copper to next generation fiber/4G broadband technologies. Previous research analyzes the emergence of a two-tiered Internet and draws policy inferences primarily in terms of the existence of market power by monopolistic/duopolistic infrastructure providers, inefficient discrimination by this class of gatekeepers to the open Internet, and/or innovation on the edges of the system. There has been little attention paid to the challenges best effort retail contracts that allocate the risk of capacity under-provisioning pose to buyers in a market where more and more applications require minimum service reliability standards. Voices of consumers are therefore almost always supressed in research and policy debates about the optimal design of institutions for ensuring universal access to the open Internet. This article tries to fill this gap by documenting barriers to accessing the open Internet faced by consumers. The first part of the paper provides an overview of the literature on the implications of imperfect contracting for the efficient operation of market systems and as a driver for consumer protection regulation. Then we use quantitative content analysis/natural language processing (NLP) techniques to analyze over 20,000 consumer complaints and carrier responses submitted to the U.S. Federal Communications Commission (FCC) between 2015 and 2017 obtained through the Freedom of Information Act (FOIA) requests to map the interplay between buyers and sellers in a market for Internet connectivity. We conclude with an analysis of public and private legal mechanisms that may help counteract negative externalities from the rise of a two-tiered Internet on quality and affordability of access to the open Internet.

The Evaluation of Asymmetry in Price Transmission and Market Power in Iran Sugar Production Industry

<p>Asymmetric price transmission in production institutes can be a reason for the existence of market power. In this regard, by the help of an integrative sample, this study simultaneously analyzes the price transmission between production markets and retails markets of sugar in the presence of the parameter of market power. For this purpose, the seasonal data of the required variables during the years 1995-2013 was used. In order to meet the study objectives, the behavior of the retails price of sugar was evaluated in the framework of two regimes of different changes which were compatible with nature of presenting agricultural products that are widely supplied in the harvest seasons. Also, the inverse elasticity of product supply was used as the parameter of market power. Considering the more probable regime (second regime), it was realized that the marketing elements at the wholesale level intend to price transmission increase more intensively than price decrease to the retail trades level. In this regime, asymmetric price transmission and existence of market power were approved. In the first regime, market power was much more and considering the fact that it has the 30% probability of happening, it has more compatibility with the seasons when supply is abundant. In these seasons, sugar production and refining units increase the market power and create a monopsony market in buying the inputs.</p>

Grau de Concorrência e Poder de Mercado nas Exportações de Leite em Pó para o Brasil

Resumo: Há indícios de que Argentina e Uruguai atuem como oligopolistas e exerçam poder de mercado nas exportações de leite em pó para o Brasil. As firmas dos dois países supracitados exportam quase a totalidade destes derivados para o território brasileiro, ao passo que há uma regionalização do comércio internacional destes produtos, restringindo a concorrência com outros países. O objetivo central do presente trabalho é verificar o grau de concorrência nas exportações de leite em pó integral e desnatado para o Brasil pela existência do poder de mercado praticado pelos países exportadores. Para isto, utiliza-se o modelo de demanda residual, estimado por mínimo quadrado de dois estágios (MQ2E), seemingly unrelated regressions (SUR) e mínimo quadrado de três estágios (MQ3E). Os resultados indicam que o Uruguai atua como oligopolista e exerce poder de mercado em ambos os mercados, enquanto a Argentina, apenas no caso do leite em pó integral. Os resultados sugerem que o Brasil deve buscar meios de elevar a concorrência nas importações de leite em pó, já que, assim, os preços tenderiam a ser menores e os consumidores se beneficiariam neste aspecto.

Competition law and the Malaysian financial services market: an analysis of the structure and level of competition in the market

The main objective of competition law is to protect the process of competition by preventing anti-competitive behaviour such as abuse of dominant position and anti-competitive mergers. The assessment of market structure and the level of competition in the financial sector are important for the exercise of the competition authority's power to enforce the national competition law. It helps the competition authority to better understand the nature of the financial services market such as the existence of market power and features that facilitate anti-competitive behaviour. This paper attempts to analyse structure of the market and the level of competition in the Malaysian financial market using two measures, namely concentration ratio (CR) and Herfindahl-Hirschman index (HHI). The study shows that the banking sector can be considered as 'unconcentrated'. However, based on ownership (foreign or local) the study indicates such sector is 'moderately' concentrated. For the insurance sector, general insurance can be considered as 'unconcentrated', whereas life insurance is 'highly concentrated'.

Empirical Studies of Competition in the Chilean Electricity Market

This paper analyzes the levels of competition and the existence of market power in the Chilean electricity market using econometric models. Previous studies of this subject are based on simulations models, but this one is the first using information of market transactions. We study the contracts markups in two different situations. First, we analyze the impact of the Argentine gas crisis on the levels of competition. Second, we compare the intensity of the competition among generators in large customer contracts and in distribution auction processes. We find statistically significant evidence to affirm that the margins of the contracts increased after the gas crisis. This variation cannot be explained exclusively by the change of developing technology after the crisis. In addition, there is evidence to affirm that the generators compete more intensely in auctions of distributors that in the large customer contracts. This difference cannot be attributed to the characteristics of customers, since in both cases there are similar potential risks. These two studies are sufficient evidence to discard high degrees of intensity of competition in Chile electricity market.

Competitive Conditions of the Tunisian Banking Industry: An Application of the Panzar–Rosse Model

AbstractThis study employs the Panzar–Rosse H‐statistic to assess the competitive conditions of the Tunisian banking industry over the period 1999 to 2003. The results show that the banking market is in long‐run equilibrium and the Panzar–Rosse H‐statistic indicates that the Tunisian banking market is operating under conditions of monopoly. It seems therefore that the liberalization process and the reforms implemented since 1987 to the banking sector could not compensate, for the period under study, the existence of market power in this sector.

Measuring the degree of market power in the Greek manufacturing industry

This paper investigates the competitive conditions in the Greek manufacturing industry, estimates the net and the total welfare losses due to the possible existence of market power and investigates factors affecting the market power at sectoral level and over time. The bootstrap method is applied to assign measures of accuracy to the statistical estimates. The empirical results imply the presence of imperfect competition in the Greek manufacturing industry and the existence of welfare losses. Furthermore, the findings indicate that labor intensity, the sector size and the openness influence the market power at the sectoral level and labor intensity, while the number of firms and the openness affect the market power over time.

Market power monitoring under open access system

In this paper, an engineering procedure is proposed for complete market power monitoring under open access system. Market power monitoring of any given system or network is done by using market power assessment and market power indices For any given network, market power assessment is to identify which generation company (GENCO) raised their prices when the demand in the concerned area is increased. After identifying the GENCO who raised their prices, market power indices are used to indicate how much market power have been used to raise their prices. In this paper, three market power indices, relative market power (RMP), Lerner index (LI) and Herfindahl-Hirschman index (HHI) are used for identifying the existence of market power. The impact of load variation, price variation and random failures on market power has been investigated by performing three experiments. These experiments were conducted using MATPOWER, which simulates a full AC network with IEEE 30 bus system, six of which are generators.

Measuring Market Power and Welfare Losses in the Greek Food and Beverages Manufacturing Industry

This article tests for the degree of market power in the Greek food and beverages manufacturing industry over the period 1983–2007 based on the Bresnahan’s conjectural variation model of competition. It also adopts the methodology of Dickson and Yu to estimate the net and the total welfare losses due to the possible existence of market power. The bootstrap method is applied to assign measures of accuracy to the statistical estimates. The empirical results indicate the presence of some degree of market power in the Greek food and beverages manufacturing industry and the existence of welfare losses.

A New Approach to Testing Marginal Productivity Theory

We address the long standing question of whether production factors are paid their marginal products. We propose a new approach that circumvents the need to specify production functions and to compare marginal products to factor payments. Our approach is based on a simple equation that directly relates firms' profits to discrepancies between factor payments and marginal products. Our empirical application using data on manufacturing firms suggests that capital receives more than its marginal product, intermediate inputs receive less, and labor receives about its marginal product. Although there are differences with respect to firm size, deviations from marginal productivity theory generally seem limited. Our results have important implications for the distribution of income, the presence of optimizing behavior, and the existence of market power.

Efficiency and Market Power in Spanish Banking

Some recent studies have been investigating the existence of market power in the European banking system, in general, and the Spanish banking industry, in particular. Although results are mixed, the evidence suggests some commercial banks and savings banks benefit from monopoly rents. Some other studies [Berger and Hannan, Review of Economics and Statistics LXXX (1998) 454–465] have also found strong evidence that banks in more concentrated markets exhibit lower cost efficiency levels. Our study merges these two groups of findings by exploring how cost and revenue efficiency measures for Spanish banks are related to the so-called return to the dollar (RD), whose advantage over other profitability measures lies on it being a ratio—in contrast to the additive structure associated with profit. This relationship is explored by considering nonparametric procedures, a set of techniques which is more consistent with those employed to measure efficiency in the first stage of the analysis. Results show that banks’ efficiency is differently related to the return to the dollar according to different circumstances. Specifically, for those firms whose revenues are lower than their costs, the relationship is positive. However, it turns to be negative for those banks with revenues above costs, suggesting that the “quiet life” might be a reality for those banks exerting market power. This finding is more apparent when decomposing efficiency into its different components (cost/revenue, technical, and allocative), since the relationship found is more obvious for allocative efficiency, either on the cost or revenue side.

Effects of Country of Origin Labeling in the U.S. Meat Industry with Imperfectly Competitive Processors

The study examines the impacts of implementing mandatory country of origin labeling (COOL) on producer and consumer welfare in the U.S. meat industry. The equilibrium displacement model developed in this study includes twenty-nine equations representing retail-, processing-, and farm-level equilibrium conditions for the beef, pork, and chicken industries. Unlike previous studies, the model allows trade between domestic- and foreign-origin products and considers the imperfectly competitive market structure of meat processers. Empirical results show that without a significant increase in domestic meat demand, producers are not expected to benefit from the mandatory COOL implementation. Results of a sensitivity analysis indicate that consumers tend to bear more COOL costs than producers, as the own-price elasticity becomes more inelastic, and that producers’ benefits increase as the elasticity of domestic demand becomes more elastic with respect to the price of imported products. The existence of market power in upstream and downstream markets of processors negatively affects both consumer and producer surplus. One implication of our findings is that U.S. beef and pork producers’ promotion and advertising programs would be successful in expanding domestic demand when the programs make the own-price elasticity of domestic demand more inelastic and the cross-price elasticity of domestic demand more elastic with respect to import price.