Monopolistic Competition Research Articles

Efficiency and Competitiveness of the Equatorial Guinean Financial Sector

The private sector, in order to function properly, needs financing from the national financial sector, and so the efficiency and competitiveness of said financial sector arouse the interest of many researchers, who perform analyses in order to provide authorities and decision makers with relevant information for the decision-making process and the design of their financial policies. This study contributes to this line of research, analyzing both technical and economic efficiency (allocative and cost efficiency) in the financial sector, focusing on banks, using a sample of Equatorial Guinean firms during the period of 2013–2019. Furthermore, the competitiveness of the financial sector is also analyzed. Knowing how efficient and competitive the financial sector is could answer many of the questions that arise when regulating the national business sector. To carry out this analysis, parametric approaches such as stochastic frontiers and non-parametric techniques such as data envelopment analysis are used, as well as different competitiveness indicators (Boone, Panzar–Rosse). During the research, it is found that the banking sector, which represents the financial sector of the country, operates with low levels of technical efficiency: the Cobb–Douglas production function and the trans-logarithmic production function showed similar average efficiency results. Regarding competitiveness, the financial sector operates under monopolistic competition. Therefore, much remains to be achieved to improve the efficiency and competitiveness of the financial sector for the development of Equatorial Guinea. It is the responsibility of economic agents to provide a good business climate in the country and guarantee perfect competition in the financial market to promote national development.

A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers

Our novel approach to modeling monopolistic competition with heterogeneous consumers involves a space of characteristics of a differentiated good (consumers' ideal points), alike Hotelling (1929). Firms have heterogeneous costs a la Melitz (2003). In addition to price setting, each firm also chooses its optimal location/niche in this space. We formulate conditions for positive sorting: more efficient firms serve larger market segments and face tougher competition in the equilibrium. Our framework entails rich equilibrium patterns displaying non-monotonic markups, high in the most and least populated niches, and the unequal gains from trade across different consumers.

ПРИНЯТИЕ РЕШЕНИЙ В УПРАВЛЕНИИ ЦЕНОВОЙ ПОЛИТИКОЙ НА РЫНКЕ РЕЧЕВОЙ АНАЛИТИКИ

The article is devoted to adapting general mathematical models of the software markets for describing the mar-ket of a specific product. These are the technologies of artificial intellect in speech analytics. The purpose of this study is to create a modeling instrumentation for pricing the technologies of speech analytics in companies which enter this mar-ket. The purpose also includes recommendations provided with the price policy. The object of the study is the Russian market of speech analytics technologies. The subject of the study are the prices of this product in companies which enter the market being explored. In this studying the authors use classical methods of economical and mathematical modeling the markets with different competitive levels (monopoly, duopoly, oligopoly, monopolistic competition). The results of the study are the foundations of prices for the companies which enter the speech analytics market. These prices are based on three kinds of economical mathematical models: regression, rating and marginal indicators. All three kinds of models lead to one recommendation. A company entering the speech analytics market, when setting a price, should focus less on the quality of speech recognition (this factor has little effect on the price in all three models), and more on the availability of additional options: the more of them, the higher the company’s ability to set the price at a level closer to the market leaders.

Oligopoly Market and Monopolistic Competition in the Digital Era: Shariah Economic Perspective

Oligopoly Market and Monopolistic Competition in the Digital Era: Shariah Economic Perspective

Особенности рыночных структур с позиции регулярно-динамической теории

The article focuses on the application of the regular-dynamic method in the theory of industry markets. It introduces the Hamilton function and key parameters of portal connections that describe market barrier properties and formulates the fundamental equations of market dynamics. The solutions of these equations determine crucial characteristics of commodity-money exchange at each market link and establish relationships that describe typical regimes of local equilibrium market interaction, including perfect and monopolistic competition, pure monopolies and monopsonies, as well as oligopolies and oligopsonies. The study reveals that the interaction among agents in a perfectly competitive market is influenced by weakly disturbed portal connections, which prevent firms from reaching a profitable level of exchange with an equilibrium price solely determined by technological parameters within the firms. In the case of a monopolistically competitive market, the price demonstrates an inversely proportional dependence on the volume of supply, which is characteristic of small businesses offering differentiated goods based on quality. It is observed that the equilibrium price in monopoly markets exhibits monotonic growth as the production activity of interacting firms increases. This price increase is attributed to an elevation in the seller’s barrier and a reduction in the depth of buyers’ market pits in the case of pure monopoly, while the reverse occurs in pure monopsony with an increase in the depth of the buyer’s pit and a decrease in sellers’ barriers. The article investigates the relationship between the equilibrium price and the parameters of technological processes, as well as the barrier properties of firms acting as sellers and buyers in oligopoly and oligopsony markets. Furthermore, the study highlights that the structure and effectiveness of oligo markets significantly depend on the relative positioning of technological frequencies between market leaders and outsiders. The article proposes an analytical description of the “race for the leader” effect. Lastly, for all the analyzed modes of market interactions, the stability of the processes governing equilibrium price formation is substantiated.

Monopolistic Competition, Rising Markups, and Optimal Taxation of Participation

Monopolistic Competition, Rising Markups, and Optimal Taxation of Participation

Decoding the Market Structure: a Comprehensive Analysis and Evaluation of Monopolistic Competition in the Electronics Industry

Decoding the Market Structure: a Comprehensive Analysis and Evaluation of Monopolistic Competition in the Electronics Industry

Отраслевой аспект расширения торговли в Западной макрозоне АТР: роль глобальных форматов

The purpose of this study was to assess the impact of countries participation in global trade formats on the turnover of commodity and industrial products in the Western macrozone of the Asia-Pacific Region (APR) in 1993–2021. It is shown that over the last three decades the Western macrozone of the APR, which includes the countries of East Asia, Oceania and Australia, has become the most dynamic economy in the world due to the reduction of restrictions in intra-regional trade. The estimation of border effects based on the gravity model confirmed the long-term total cost reduction for trade in commodity and industrial products in the Western macrozone of the APR. The estimates identified the crucial importance of global format mechanisms for trade expansion in the Western macrozone of the APR in the long run: by 113% for commodity products; by 101% for industrial products. The assessment of indirect trade effects revealed the key role of global formats in expanding trade in the Western macrozone of the APR by creating a common ‘benchmark’ for reducing trade barriers, including by extending such behavior to countries that have not acceded to the GATT and WTO. The discovered multiplication of direct and indirect trade effects of the GATT and WTO indicated the sufficiency of the mechanisms of global formats for the formation of a free market for commodities in the Western macrozone of the APR, which does not require the creation of free trade zones, in contrast to the market for industrial goods, which operates under conditions of monopolistic competition. The estimates obtained in the study complement the existing conclusions on the impact of integration formats on trade, indicating that the sectoral aspect of trade interactions is a key parameter for identifying rational motives explaining the use of specific integration instruments to expand trade within the Western macrozone of the APR. On the basis of the obtained assessments the motives of Russia’s long-term trade and economic positioning within the Western macrozone of the APR with reliance on the WTO mechanisms under the conditions of preserving the raw material model of the national economy are explained

Impacts of Rating System on Platform Markets: Monopolistic Competition Approach

Impacts of Rating System on Platform Markets: Monopolistic Competition Approach

An Empirical Analysis of US-Japan Trade Agreement on Welfare in ‘New’ and ‘New New’ Trade models of Monopolistic Competition and Firm Heterogeneity

The perfectly competitive Armington’s model underestimates the welfare effects of the US-Japan Trade Agreement, whereas the monopolistically competitive Krugman "New" trade model will have positive scale effects. As trade begins in firm heterogeneity Melitz "New New" trade model, only the most competitive firms can survive. Although the Melitz model has negative variety and fixed cost effects, the larger positive technology and scale effects offset the negative effects. Thus, the total welfare gains in the Melitz (2003) model owing to production technology and scale effects are much larger than those in the Armington (1969) and Krugman (1979) models. The total welfare gains in the Melitz (2003) model are also larger than those in the Armington (1969) model because of the scale effect of the US-Japan Trade Agreement. Thus, the welfare effects depend on the economic structure of the free-trade agreement members. However, we need to adopt the more realistic Melitz "New New" trade model and Krugman "New"trade model than the standard conventional Armington model to analyze the more plausible economic effects of the US- Japan Trade Agreement.

Modeling innovation and regulation thanks to game theory: Bertrand competition

One uses the model which has been already presented in articles by the author: competition through prices (Bertrand competition), the demands being deduced from the consumers ‘utilities. One can highlight three phenomena: “Monopolistic competition”: The products sold are enough differentiated, each firm having its “garden”, its customers it keeps provided its price is not higher than the others’ prices. The criterium “buy and close down” profitable: when to buy and close down is profitable, the incentive to merge is stronger. It is a sign of saturated market. The “non-differentiating innovation”: One can model it. Each utility (u1, u2, u3) becomes (u1 + K, u2 + K, u3 + K), K > 0. One demonstrates, thanks to tractable examples, that non-differentiating innovation can trigger the criterium “buy and close down profitable”. The products are less differentiated than at the start (“monopolistic competition” the “buy and close down” being not profitable). It incites firms to choose disruption.

ВИЗНАЧЕННЯ РИНКОВОЇ МОДЕЛІ ВІТЧИЗНЯНОГО ДЕПОЗИТНОГО РИНКУ: АНАЛІЗ КОНЦЕНТРАЦІЇ

The effective functioning of the domestic deposit market presupposes the presence of positive dynamics regarding the equal placement of free funds of legal entities and individuals in the accounts of all functioning banks at the optimal level of the interest rate on deposits. It is under such conditions that the studied market would present a model of perfect competition. However, the conducted research confirmed the fact that the domestic deposit market is not an example of a model of free (unrestricted) competition. With the use of official NBU data and well-known methods for determining the level of market power (concentration coefficient, Herfindahl-Hirschman index), we found a generally "moderate concentration" of the studied market, which allows us to characterize it as a market model of monopolistic competition, despite the fact that over the past four years state banks in Ukraine demonstrated significant (in their favor) differences in the share of population deposits compared to private and foreign banks. In the Ukrainian deposit market, in general, there is an outflow of funds from deposit accounts, which is explained, first of all, by low interest rates on deposits. In this context, it is extremely important for banks to intensify efforts to introduce new deposit products, thereby creating opportunities to increase term deposits, which, among other opportunities for accumulating funds, are relatively stable. They are one of the important sources of financing assets, increasing the liquidity and solvency of banks, intensifying credit and investment activities and, in general, supporting the financial stability of the country's banking system.

Hybrid Marketplaces with Free Entry of Sellers

We study a hybrid marketplace such as Amazon that sells its own products and sets commissions on third-party sellers that engage in monopolistic competition with free entry. For a large class of microfoundations based on a representative agent, the introduction of its own products by the marketplace is neutral for consumer welfare for a given commission; but this product introduction exerts an ambiguous impact through changes of the commission. A “demand substitution mechanism” pushes for a higher commission; but an “extensive margin mechanism” pushes for a lower commission that is aimed at attracting new sellers and more purchases on the marketplace. For instance, with constant demand elasticities, a hybrid marketplace sets a lower (higher) commission rate and increases (decreases) consumer welfare compared to a pure marketplace if its products face a less (more) elastic demand.

Theoretical aspects of the market functioning of vegetable products and its features

The article examines the theoretical principles of the market functioning of vegetable products and highlights its features in the conditions of martial law. The important role of the vegetable market in ensuring food security, generating income for small agricultural producers, etc. is argued. In general, the market is considered as a set of interests and actions of real and potential buyers, as well as the conditions under which the exchange is carried out. It is substantiated that the agricultural market has a rather complex structure and represents a set of markets that serve all aspects of agricultural production, is a dynamic system of economic relations. It has been proven that the market of fresh vegetables consists of numerous submarkets characterized by perfect competition. It is highlighted that intra-branch, perfect (pure) and monopolistic competition is characteristic of the specialized vegetable market. The features of the production process of growing, processing, and storing vegetable products are highlighted, which affect the specifics of the functioning of the vegetable market. The biological and economic characteristics of the classification of vegetable crops were systematized and their main groups were identified, on the basis of which the elements of the vegetable market infrastructure were characterized, namely system-forming, providing, functional and controlling. The peculiarities of the vegetable market are summarized, namely: low elasticity of demand; high production costs; wide differentiation of the range of vegetables, local nature of satisfaction of consumer demand; a higher level of average monthly consumption by the rural population; commodity producers are private peasant farms and small agricultural enterprises, reduction of forecast volumes of commodity supply in the conditions of martial law; high dependence of supply on changes in weather conditions; seasonal demand for products; low level of market infrastructure development; high concentration of potential consumers of vegetables in cities; influence of intermediaries on the price level; weak awareness of market subjects. It is substantiated that the economic relations between the subjects of the market of vegetable products are formed on the basis of the interaction of economic subjects in the production, distribution, exchange and consumption of vegetables, which is aimed at achieving high final results and is manifested through specific production, economic and organizational ties between them. The author's definition of the market of vegetable products is a set of agricultural enterprises, canning industry and market infrastructure objects that carry out the main business processes and pursue the full satisfaction of the population's needs for high-quality vegetable products in accordance with rational nutrition standards and consumer demand. Key words: market of vegetable products, demand, supply, market infrastructure, market structure, product traffic.

Platform competition with free entry of sellers

We study platforms setting access prices and commissions on revenues of sellers engaged in monopolistic competition with free entry, such as the app providers on the app stores of Apple and Android devices. The link between prices on different sides induces the platforms to redistribute all the commission revenues through lower access prices and to set the optimal commission rates from the point of view of consumers, taking into account the pass-through on the prices of sellers, the elasticities of demand and surplus for their services and the elasticity of entry with respect to profitability. We discuss the role of heterogeneous sellers, substitutability between sellers’s products and limitations of the basic alignment of interest due to direct channels for sellers and consumer myopia.

The State of Competitiveness in Kuwait Banking Sector

The aim of this study is to examine the competitiveness in the Kuwaiti banking sector for the period 2010 - 2020. The methodology of study assessed the degree of competition among nine national Kuwaiti banks using the Panzar and Rosse model, or the H statistic approach. The study assessed how close the banking sector in Kuwait is to perfect competition. It built a model for the revenues of the banking sector in Kuwait. The model considered various specifications that affect the banking sector’s performance like revenues, risk, deposits, and bank size. In addition, this study analyzed the major factors affecting this sector’s performance. Using the panel data methodology of estimation, the results revealed that the market structure for the banking sector in Kuwait is close to monopolistic competition. Though the banking sector in Kuwait is still in its development stages, the results provided a signal to policy makers regarding their policies. One main implication of the study is to keep strong competition among banks which requires maintaining the stability within the banking system.

The Role of Intra-Industry Trade, Foreign Direct Investment, and Renewable Energy on Portuguese Carbon Dioxide Emissions

This paper revisited the link between intra-industry trade (IIT) between Portugal and Spain and Portuguese carbon dioxide (CO2) emissions. The research also considers the effects of foreign direct investment (FDI) on CO2 emissions, pondering the arguments of the pollution haven hypothesis and the halo hypothesis. As an econometric strategy, this investigation has applied panel data, namely a Pooled Mean Group of an Autoregressive Distributed Lag (ARDL) model and Panel Quantile Regression (PQR). The preliminary unit root tests indicated that IIT, Portuguese and Spanish renewable energy, and Portuguese FDI are integrated into the first differences and stationary with the second generation test (Pesaran methodology). In the next step, this study applied the multicollinearity test and cross-dependence between the variables. The variance inflation factor test demonstrated that FDI and IIT have no multicollinear problems. However, as expected, collinearity exists between Portuguese and Spanish renewable energy. Regarding the cross-sectional dependence test, this investigation concluded that the variables have a dependence between them. The cointegration test revealed that the variables are overall cointegrated. In the econometric results with the ARDL estimator, this investigation has found that IIT between Portugal and Spain is negatively correlated with Portuguese CO2 emissions, showing that this type of trade encourages environmental improvements. However, the PQR demonstrates that there is an opposite relationship. According to this, Portuguese and Spanish renewable energy is negatively impacted by CO2 emissions, revealing that renewable energy aims to decrease pollution. Finally, Portuguese FDI reduces CO2 emissions, which is explained by product differentiation, innovation, and monopolistic competition.

Market structure and industry location in a footloose capital model

Comparison among Cournot, Bertrand and monopolistic competition receives recent attention in industrial organization, but not in New Economic Geography. To fulfill this gap, we examine how the difference in market structures affects industry location in a footloose capital model. We find that the home market effect is strongest in Cournot competition, second strongest in Bertrand competition, and weakest in monopolistic competition. And, we link the insights in industrial organization with our model of geography.

Product design in monopolistic competition

AbstractWe consider a model of monopolistic competition where producers can manipulate an elasticity parameter at an early stage. We interpret this as a choice of product specialization. Lower marginal costs of production lead to more generic products in all equilibria, which lead to fewer varieties under free‐entry. Entry of a new firm increases overall specialization and increases prices, that is, the environment exhibits price‐increasing competition. The loss of consumer surplus due to higher prices and lower consumption is compensated by the value of additional variety, hence entry also increases consumer surplus. Therefore, price‐increasing competition need not be anticompetitive under endogenous specialization.

Changing Market Structure and Evolving Ways to Compete: Evidence from Retail Gasoline

This paper examines the pricing behavior of sellers in a market undergoing a significant restructuring, using data from the ongoing introduction of self-service technology in the Korean gasoline market in the 2000s. I provide evidence that full-service premium increased during the market transition. I further show that a monopolistic competition model is not enough to explain the increasing premium.The pricing behavior of sellers differs by product position: self-service sellers compete for price-sensitive consumers, whereas full-service sellers differentiate their product by offering a variety of bundled products and services, such as coffee, carwash or even nail salons, to compete for less-price-sensitive consumers.Taken together, the strategic choices of sellers evolve in different ways when the market structure changes, with each type of seller using its unique position, resulting in an increase in full-service premium during the market transition from full-service to self-service.