Non-price Effects Research Articles

The Impact of Consolidation on Cable TV Prices and Product Quality

Research on differentiated products markets often uses structural demand/supply models to identify firms’ marginal costs as product-level cost data is unavailable. Using unique demand and cost data from the cable TV industry, this paper evaluates a differentiated products model’s ability to identify marginal costs. I find firms systematically price below profit-maximizing levels, leading to biases in the model’s marginal cost estimates. I study the implications for merger simulations, and find that these biases compromise estimates of merger-related cost efficiencies, yet do not prevent these models from generating useful predictions of the price and non-price effects of mergers.

Multimarket Contact and Intensity of Competition: Evidence from an Airline Merger

This paper examines the relationship between multimarket contact (MMC) and the intensity of competition. We take advantage of a recent merger, which altered the extent of MMC throughout the US airline industry, to understand the nature of MMC’s impact on the airlines’ frequency of service. Evidence that non-price effects of MMC are a part of the longer-term industry equilibrium is not robust. However, we observe that following the merger the market players started taking the degree of MMC into account in making their frequency decisions in line with the ‘mutual forbearance’ hypothesis; however, the effect showed signs of diminishing over time. Our results have implications for merger evaluation in industries where consolidation may lead to a higher extent of multimarket contact.

Risk Related Non-price Effects of the CAP Arable Crop Regime

This paper seeks to provide an empirical measure of the (absolute and relative) size of the relative price effect, the wealth effect and the insurance effect for a specific policy package: the arable crop regime of the Common Agricultural Policy (CAP) of the European Union (EU).

Fed Speak: A Market Microstructure Analysis

Many authors have argued that increased transparency by central banks is likely to improve economic welfare by reducing information asymmetries in financial markets. Accordingly, central banks worldwide have taken steps to release more information related to their policy decisions. Extant empirical studies related to the effects of monetary policy typically examine the relationship between some policy metric and security returns. Such studies, however, do not adequately characterize information asymmetry, or other non-price effects on financial markets associated with central bank announcements. A more direct measure of information asymmetry is the bid-ask spread, especially the adverse selection component of the spread. If FOMC announcements create information asymmetries, then we can discern the sign and magnitude of the effect by analyzing liquidity measures during the announcement window relative to liquidity measures during an appropirate benchmark period. In addition, we use this analysis to assess whether the recent efforts by the FOMC to reduce information asymmetry have been effective.

An Estimation of Supply in the Catfish Industry

ABSTRACT Lack of research and understanding of the forces that cause fluctuations in the supply and prices of catfish make it difficult for farmers, lenders, and processors to make appropriate decisions. This paper examines catfish supply, using a multi-stage model designed to capture supply dynamics. This model separated catfish supply into distinct production stages that included fry/fingerling, food-size fish, and wholesale supply of round weight processed to analyze effects and interactions of different production stages. Results of the multi-stage model were then used to simulate the effect of changes in feed cost and farm prices on supply of catfish. Quarterly data covering the period 1985-95 were used to conduct the analysis. The supply of catfish reacts to higher catfish prices indirectly, by increasing the supply of fry/fin-gerlings. Food-size supply and feed quantities increase in subsequent quarters. Supply of round-weight fish for processing (wholesale supply) is affected by its role as a cost to processors, who will purchase lower quantities at higher prices unless new markets or strategies are developed. The first two stages (fingerling and food-size fish production) showed relatively weak price effects compared to non-price effects. The inelastic short run supply of food-size fish suggested a non-responsive quantity supplied to price of fish and feed cost. While increased catfish prices may result in increased acreage over the long run, catfish foodfish supply does not adjust rapidly to price fluctuations. An imperfectly competitive market structure at the processor level and the high level of capital and management required in catfish farming may be contributing factors. Simulation results further suggested that an increase in feed cost will lead to a decrease in supply. Increases in farm price would increase supply at both the fingerling and the food-size Stages.

The Power Equipment Industry in Transition

This paper deals with the expected effects of the EEC Commission decision to open up EEC public procurement markets within the Single Market initiative. These effects are viewed on the behavior of European utilities and on the power equipment supplying sector. Both price and non-price effects are analyzed. The new market configuration should require a new kind of supplier, able to add the advantages of being "domestic" to the advantages of being part of a large, transnational group. Thus, such an institutional initiative can explain a large part of the general turmoil which hit the international power equipment industry in the late 1980s. However, the increasing concentration of the supply sector-also stimulated in part by the success of gas turbine technology-reduces the expectation that EEC utilities will take advantage of the opening up of their procurement markets, at least in terms of lower equipment prices.

Energy prices and conservation The Canadian experience

Using an econometric energy demand model, this paper separates price from non-price conservation effects in the period 1974–1977 and examines what might have happened to Canadian energy demands if Canada had priced its energy at OPEC equivalent levels instead of pursuing a gradual ‘phase-in’ policy. Prices accounted for the major proportion of energy savings over the period 1974–1977, particularly in the industrial and transport sectors, and for oil and gas. Non-price effects seem to have had a larger impact in the earlier years and for oil and electricity. Movement to international prices during the period studied could have reduced Canadian secondary energy demands by the oil equivalent output of 1.3 Syncrude-sized (125 000 bbl/day) oilsands plants.