Market Power Research Articles

The impact of environmental regulation on firms’ markups: evidence from China

ABSTRACT A comprehensive evaluation of the costs and benefits of environmental regulations provides empirical evidence for policymakers to formulate and introduce environmental policies. Firms’ profitability and competitiveness manifest their market power and provide the micro foundation for economic development and social stability. Therefore, this paper focus on investigating the impact of air pollution environmental regulation on manufacturing firms’ market power, measured by markups, with a difference-in-differences (DID) method. Using air pollution control policy, requiring China’s Key Cities for Air Pollution Control (KCAPC) to meet air quality standards within a specified time limit as a natural experiment, our DID estimations show that air pollution regulation significantly leads to an increase in firms’ markup rate by 0.002 in key cities that did not meet air quality standards. Heterogeneous effects show that this impact is larger for polluting firms, private-owned and foreign-owned firms, and firms located in western and central cities and cities with high marketization. Productivity and market share may be two main influencing channels to explain the positive impact of air pollution environmental regulation on firms’ markups. Our findings suggest that strengthening environmental regulation is conducive to improving the competitiveness and market power of manufacturing firms, lending support to the enforcement of environmental regulations.

Research letter: the role of customer fear of missing out on purchase intention

ABSTRACT Despite the recent popularity of social media as a powerful marketing channel, limited studies have examined how customer personalities influence their reactions toward social media content. Thus, this study examines the role of a customer psychological characteristic known as fear of missing out (FOMO) in the formation of anticipated emotion (i.e. elation, envy, comfort, and expense regret) and purchase intention toward a restaurant based on social media marketing. Using surveys, the study collected information on 345 social media users. A SmartPLS estimation shows that customer anxiety over missing out is a strong indicator of anticipated emotions toward the restaurant experience. Specifically, positive impacts of anticipated envy and comfort on customer purchase intentions are found. However, customer anticipated expense regret toward future experiences negatively influences behavioural intentions. Finally, this study examines differences in relationships between FOMO, anticipated emotions, and purchase intentions across demographic profiles (i.e. gender, age, income, and education).

Metaphor-less Rao-3 and artificial neural network with parallel computing-based wheeling pricing in competitive power market

Metaphor-less Rao-3 and artificial neural network with parallel computing-based wheeling pricing in competitive power market

Beyond Borders: A Review of Food Market Integration and Sustaiable Develomnet Goals

This paper presents a comprehensive review of food market integration research spanning 1990–2023, provides a thorough bibliography, and emphasizes its growth between developed and emerging economies.  It evaluates 140 papers with the aim of highlighting the importance of price transmission, market stability and market integration in the food sector. The study provides an overview of econometric methodologies, review global assessment methods, and identifies the major elements that influence market integration, such as commerce, social capital, government interference, export policies, institutions, information, competition, and market power. The finding reveals a rise in research activities between 2000 and 2015, with a growing focus on developing countries. This work is to offer a synopsis to researchers, academicians, and policy makers on the extent of the food market both internationally and domestically. This paper will be helpful for the researchers interested in understanding and investigating the dynamics of food market integration with a useful resource by classifying previous works and identifying current developments. The review also offers commentary on current research and prospects and their implication in line with SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities) as it promotes fair access to resources and economic opportunities.

Market power, human capital efficiency and bank performance in Kenya

PurposeThe study evaluates the influence of human capital efficiency (HCE) and market power on bank performance.Design/methodology/approachThe study employs two measures of bank performance: profitability and stability. Unbalanced panel data of 35 banks operating in Kenya for 2005–2020 collected from published financial statements is utilized. The study employs the feasible generalized least squares (FGLS) method in the analysis and the two-step system generalized method of moments (GMM) for robustness check.FindingsThe study affirms an inverted U-shaped relationship between market power and bank performance. The effect of market power on bank profitability is enhanced when a bank has highly efficient human capital. Further, HCE significantly impacts bank stability for banks with low HCE. Interestingly, a further increase in HCE narrows the net interest margins for banks with high HCE, conferring welfare benefits to customers as interest rate spreads shrink.Practical implicationsThis study provides important insights into the role of human capital in bank performance. First, banks ought to invest in promoting HCE through training and development. As regulators root for bank consolidation, attention to HCE is imperative for fostering profitability and stability.Originality/valueThe study fills an essential gap in the literature by evaluating the effect of firm-level market power on bank performance in an emerging market. We adopt a novel stochastic frontier estimator to generate the Lerner index. Further, this is the first study known to the authors to evaluate the effect of market power on bank performance in the context of human capital efficiency variations.

Terms of trade or market power? Further evidence from dynamic spillovers in return and volatility between Malaysian crude palm oil and foreign exchange markets

Terms of trade or market power? Further evidence from dynamic spillovers in return and volatility between Malaysian crude palm oil and foreign exchange markets

Analyzing The Role of Digital Marketing in Growth of E-Commerce in India: A Multiple Holistic Approach

Analyzing The Role of Digital Marketing in Growth of E-Commerce in India: A Multiple Holistic Approach

Protecting Patients And Society In An Era Of Private Equity Provider Ownership: Challenges And Opportunities For Policy.

Private equity (PE) acquisitions in health care delivery nearly tripled from 2010 to 2020. Despite concerns around clinical and economic implications, policy responses have remained limited. We discuss the US policy landscape around PE ownership, using policies in the European Union for comparison. We present four domains in which policy can be strengthened. First, to improve oversight of acquisitions, policy makers should lower reporting thresholds, review sequential acquisitions that together affect market power, automate reviews with potential denials based on market concentration effects, consider new regulatory mechanisms such as attorney general veto, and increase funding for this work. Second, policy makers should increase the longer-run transparency of PE ownership, including the health care prices garnered by acquired entities. Third, policy makers should protect patients and providers by establishing minimum staffing ratios, spending floors for direct patient care, and limits on layoffs and the sale of real estate after acquisition (forms of "asset stripping"). Finally, policy makers should mitigate risky financial behavior by limiting the amount or proportion of debt used to finance PE acquisitions in health care.

FinTech, systemic risk and bank market power – Australian perspective

FinTech, systemic risk and bank market power – Australian perspective

Intermediate product versioning

The strategic creation and management of multiple product versions are frequently utilized to exploit heterogeneous buyers. This paper examines the versioning of an intermediate product when downstream retailers compete in the consumer market. Our analysis demonstrates a departure from conventional wisdom in final product markets: versioning an intermediate product reduces the profit of the upstream firm. This reduction occurs as the market power of the retailers is enhanced, leading to a decline in consumer and total welfare.

Market power and bank risks: insights from India and Bangladesh

Purpose This study aims to investigate whether various types of risks faced by the publicly listed commercial banks of India and Bangladesh are driven by market power and provides comparative insights from both economies. Design/methodology/approach By using the adjusted Lerner index to gauge bank market power and applying the generalised methods of moments (GMM) regression approach, the research delved into the relationship between bank market power and three distinct facets of risk across a sample of 26 publicly listed commercial banks in India and 22 listed banks in Bangladesh spanning from 2011 to 2022. Findings The results indicate that for Bangladesh, both “competition fragility” and “competition stability” viewpoints coexist simultaneously across all risk types, supporting a nonlinear relationship between market power and risk. However, in the Indian context, a nonlinear association exists only in the case of credit risk, while the relationship with insolvency risk is linear, substantiating the “competition fragility view”. Apart from market power and bank-specific variables, GDP growth rate has emerged as a prominent driver across all risk categories in both countries. Research limitations/implications The filtration of banks is a limitation that might have influenced the outcomes. This study recommends that the Reserve Bank of India encourages further bank consolidation. Along the same line, Bangladesh Bank should closely oversee the growing competitive landscape. Furthermore, the regulators must monitor the elevated levels of non-performing loans to reduce credit risk so as to bolster the stability of their respective banking sectors. Originality/value This comparative study is the first attempt to analyse the market power and risk relationship and includes a novel bank-specific variable, i.e. technology, apart from other established variables.

The Reliability and Profitability of Virtual Power Plant with Short-Term Power Market Trading and Non-Spinning Reserve Diesel Generator

This study examines the profitability and reliability of a virtual power plant (VPP) with the existence of a diesel genset (DG) in the day-ahead (DA) and intra-day (ID) power markets. The study’s unique contribution lies in integrating the VPP system with non-spinning reserve DG while limiting the DG operation via minimum running time and maximum number of switching times (on/off) per day. This contribution decreases the renewables’ uncertainty and increases the VPP’s reliability. Moreover, the study proposes an optimization model as a decision-making support tool for power market participants to choose the most profitable short-term market. The proposed model suggests choosing the DA market in 62% of time (from 579 days) based on estimated VPP power supply, and market prices. Even though there is uncertainty about VPP power supply and market prices, the division between the plan and actual profits is 1.8 × 106 Japanese yen [JPY] per day on average. The share of surplus power sold from the mentioned gap is 5.5%, which implies the opportunity cost of inaccurate weather forecasting. The results also show that the reliability of the VPP system in the presence of a DG increases from 64.9% to 66.2% for 14 h and mitigates the loss of power load by 1.3%.

Market power, optimal scale and competition promotion in banking: Analysis in the GCC region

AbstractWe propose an approach to identify optimally scaled banks and analyse the competition levels among banks in different stages of production in six countries of the Gulf region. The empirical results show that the global financial crisis curbed the rise in the market power of banks, but the market power continued to increase straight after 2009. Also, we show that the existing methods fail to identify that a significant proportion of banks across different countries, up to 90%, are operating at an optimal scale. Finally, we discuss the misclassification of banks by the traditional approach to scale analysis and its implications for decision‐making by competition authorities and central banks that assess and promote competition in banking. We advocate a more nuanced approach to competition policy that recognizes the potential impact of various phases of banks' production process on the competition.

Estimating Market Power Exertion in the U.S. Beef Packing Industry: An Illustration of Data Aggregation Bias Using Simulated Data

This study investigates data aggregation bias in estimating market power in the U.S. beef packing industry using New Empirical Industrial Organization (NEIO) models and shows empirical procedures that can alleviate the bias. Unlike many earlier studies in estimating market power exertion, our study examines the data aggregation bias when market-level data are used in place of firm-level data and show how the bias could be reduced. We first derive data aggregation bias analytically, then empirically investigate the aggregation bias by estimating both firm and aggregate industry models. Because the firm-level data are not available, we use simulated data generated from the Monte Carlo simulation method. Hybrid models, combining limited firm-level data with aggregate data, are also estimated to illustrate how the aggregation bias could be reduced. Our results show that aggregate models with industry-level data tend to underestimate market power exertion in the U.S. beef packing industry, and the aggregation bias is statistically significant at the 1% level. Comparing results from hybrid models with firm-level estimates, we find that hybrid models reduce the bias but do not remove the aggregation bias significantly. The sensitivity analysis shows that market power estimate and aggregation bias are sensitive to functional forms.

Electricity market equilibria analysis on the value of demand-side flexibility portfolios’ mix and the strategic demand aggregators’ market power

Electricity market equilibrium analysis is becoming increasingly important within the today’s liberalized electricity market and regulatory context for both market participants and policy makers. The former ones want to make informed business decisions to optimize their market position, while the latter need to promote efficient equilibria that satisfy both supply and demand-side requirements and optimize social welfare. In this paper, we focus on modeling the strategic demand aggregators’ (DA) behavior via an Equilibrium Problem with Equilibrium Constraints (EPEC) formulation. We model typical demand flexibility portfolios that comprise of several types of distributed flexibility assets and renewable energy resources. We then quantify the value of demand flexibility portfolios’ mix and respective value of market power that a strategic DA may exercise with respect to each DA’s cost decrease and social welfare as a function of time for a day-ahead market use case. Simulation results show that: (i) there is an optimal equilibrium point where overall DAs’ costs decrease, while social welfare’s deteriorates negligibly, (ii) there may be a trade-off between the rate of a certain DA’s cost decrease and the rate of market power (or else % share of total demand flexibility) that this DA possesses, so the strategic DA should take this into account in order to find its optimal CAPEX/OPEX balance for its portfolio, (iii) competition among strategic DAs at the demand-side can mitigate grid congestion problems and serve as a counter-balance to the strategic behavior of the supply-side market participants.

Research on Dynamic Reactive Power Cost Optimization in Power Systems with DFIG Wind Farms

As the power market system gradually perfects, the increasingly fierce competition not only drives industry development but also brings new challenges. Reactive power optimization is crucial for maintaining stable power grid operation and improving energy efficiency. However, the implementation of plant–grid separation policies has kept optimization costs high, affecting the profit distribution between power generation companies and grid companies. Therefore, researching how to effectively reduce reactive power optimization costs, both technically and strategically, is not only vital for the economic operation of the power system but also key to balancing interests among all parties and promoting the healthy development of the power market. Initially, the study analyzes and compares the characteristic curves of synchronous generators and DFIGs, establishes a reactive power pricing model for generators, and considering the randomness and volatility of wind energy, establishes a DFIG reactive power pricing model. The objective functions aimed to minimize the cost of reactive power purchased by generators, the price of active power network losses, the total deviation of node voltages, and the depreciation costs of discrete variable actions, thereby establishing a dynamic reactive power optimization model for power systems including doubly-fed wind farms. By introducing Logistic chaotic mapping, the CSA is improved by using the highly stochastic characteristics of chaotic systems, which is known as the Chaotic Cuckooing Algorithm. Meanwhile, the basic cuckoo search algorithm was improved in terms of adaptive adjustment strategies and global convergence guidance strategies, resulting in an enhanced cuckoo search algorithm to solve the established dynamic reactive power optimization model, improving global search capability and convergence speed. Finally, using the IEEE 30-bus system as an example and applying the improved chaotic cuckoo search algorithm for solution, simulation results show that the proposed reactive power optimization model and method can reduce reactive power costs and the number of discrete device actions, demonstrating effectiveness and adaptability. When the improved chaotic cuckoo algorithm is applied to optimize the objective function, the optimization result is better than 7.26% compared to the standard cuckoo search algorithm, and it is also improved compared to both the PSO algorithm and the GWO algorithm.

Role of Influencer Marketing in Consumer Purchase Decisions: A Bibliometric Analysis and Discourse

In today's digital age, the power of influencer marketing has an important place and determines customer decisions in different sectors. This compendium delves into the complex world of influencer marketing, informed by a comprehensive analysis of the latest research in the field. With this research, we aim to re-veal the important role of employees in the formation of consumer behaviour and purchasing intention. Our journey begins by revealing the impact of an influencer's presence on multiple platforms on behaviour, showing how messaging influences emotions and behaviour. Know the connection to the affected person. Additionally, we examined the claim of polarizing influencers' identity by revealing how the debt issue leads to defensiveness that impacts on influencing marketing strategies that deliver a unique network of customer loyalty, consumer behaviour and purchasing behaviour. We explore the hidden gems in retail live streaming and marketers' social media presence, revealing their impact on offline purchasing decisions beyond the digital world. By exploring interpersonal interactions, we show how interpersonal interactions influence brand perceptions and communication outcomes. We also carefully examine the influence of creators on information followers according to the balance between business and reality. We present the next list, revealing the difficulty of uncovering practices in the influencer industry, their small impact on various dimensions of reality, and the impact of stakeholders' needs. Combining recent research studies, this cornerstone provides guidance to business leaders as they navigate the dynamic areas of business. By presenting small conversations between influencers, consumers, and brands, we provide experts with insights to increase business potential that are useful in guiding customer engagement and purchasing decisions.

Labor linkages and flow paths of industry in China

As economic power increases and market patterns adapt, labor becomes an increasingly significant factor of production. However, there is a dearth of discourse regarding the structural changes that have occurred in the correlation of the labor force across industries, as well as a visual representation of the labor force's movement across industries. To quantify and analyze the correlation effect with greater precision, it is necessary to establish an input-output model as the foundation of analysis, comparing the changes in the total output of the economic system prior to and subsequent to the exclusion using the vertical integration algorithm. By decomposing the path structure, the average propagation distance of the labor force population's demand for each industry can be determined. By employing labor force population data from the corresponding years and China's input-output tables published by the National Bureau of Statistics of China (NBS) from 2005 to 2020, this study conducts a quantitative analysis of the correlation effect between labor force population and the trend of its transfer across 19 industries. The findings indicate that the correlation effect between labor force and population is most pronounced in the manufacturing sector. Furthermore, the construction sector faces an especially critical requirement for labor force personnel from other industries. The article culminates with a recommendation that the government enhance its macro-control endeavors to address labor market risk shocks and take an active stance in response to labor market fluctuations.

Oligopoly and oligopsony in international trade

AbstractWe study the effects of international trade on the oligopsony power of firms in input markets. We build a theoretical model of international trade in which firms are oligopolists in the market for final goods and oligopsonists in the market for inputs. Consistent with evidence from the literature, firms' markups over unit costs rise with the level of oligopsony power and of oligopoly power. While trade liberalization decreases market power in one market, it has the opposite effect in the other. In particular, international competition between oligopolists in final goods markets causes oligopsony power to increase and oligopoly power to decline. In a simulation, we show that the increase in oligopsony power can more than offset the reduction in oligopoly power, resulting in a net increase in markups over unit costs.

Two-stage stochastic optimization of virtual power plant with wind power and uncertain demand

ABSTRACT The virtual power plant (VPP) has been recognized as an effective way to facilitate penetration of renewable and distributed energy resources in electricity markets. This paper introduces an adaptive curtailment strategy for a VPP comprising a wind power plant and uncertain demand, and explores the economic advantage of adaptively adjusting wind power curtailment. A two-stage stochastic model is proposed to deal with the uncertainties in wind power generation (WPG), load demand and market prices. In the model, the bid decision is made in the face of uncertainties in the first stage, while the control (curtailment) decision is made based on realized uncertain parameters in the second stage. This paper provides the closed-form optimal curtailment decision and characterizes the optimal bid decision. An efficient binary search algorithm is developed for optimizing the bid decision. By using a distribution-free approach, we show that as the prediction accuracy of WPG improves, the optimal bid decision converges toward the expected minimal power exchange, leading to a decrease in expected operational cost with diminishing marginal return. Numerical experiments based on real-world data demonstrate that compared with the existing greedy strategy and coordinated strategy, the proposed model can decrease the expected operational cost up to 16.9% and 11.0%, respectively.