Bank competition and optimal monetary policies under alternative reserve accounting schemes

The purpose of this paper is to provide a theoretical analysis of the implications of increased competition among depository financial institutions for the optimal conduct of monetary policy with respect to the ultimate goals of price and output stability. In the context of a general equilibrium model which includes rational expectations and a market for bank deposits, it is shown that a rise in bank rivalry for deposits produces a more steeply sloped LM schedule. Under a system of lagged required reserve accounting, this fact has no effect on the optimal conduct of monetary policy, which requires an operating procesure designed to target a market interest rate. However, under a system of contemporaneous reserve accounting, this fact implies that less emphasis should be placed on a market interest rate as a variable upon which the Fed's setting of reserves should be conditioned.     

The “Dark Side” of Deregulation: How Competition Affects the Size of the Shadow Economy

This paper builds a theory that explains the dramatic expansion of the underground economy in the late 1990s by the sharp increase in market competition worldwide. I model an oligopoly game where firms first decide on entry and sector, and then compete in price. Operating in the underground sector reduces variable costs, but comes at the risk of being detected and fined. As competition intensifies (i.e., as consumers become more and more price‐sensitive), underground firms attract more demand, thus stealing business and profits from official firms. As a consequence, more firms enter the underground economy. A lenient policy toward the underground economy may increase welfare when markups are high, but will be welfare‐detrimental when markups are low.     

Bowley Duopoly Under Vertical Relations

Compared to the well‐known oligopoly models such as those of Cournot, the so‐called Bowley duopoly is less known, and almost ignored in the literature. This neglect reflects the assumption that as a leader–leader model incorporating apparent excess rivalry it is presumably untenable, at least in theory. However, it is, in fact, observable in practice. Furthermore, the predicted excess competition is not only observable empirically but also accountable theoretically. We show how excess competition emerges when an upstream monopolist offers the downstream retailers a compensated game in which each acts as a leader. The outcome is not only stable but also benefits all involved actors, including consumers under vertically‐related markets, such as those presided over by a monopolist producer. This result of emergent stability shows that the Bowley duopoly should be considered alongside other oligopoly models.     

Bilateral oligopoly and quantity competition

Bilateral oligopoly is a market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, bilateral oligopoly approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one and investigate the differences in equilibria otherwise. These results lead to necessary and sufficient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied.     

A Note on Optimal Industrial Policy Towards Bertrand Homogeneous Duopoly

Recent studies in strategic trade and industrial policy analysis suggest that an investment subsidy, in the form of an R&D subsidy, a capacity subsidy or an advertising subsidy, would be a robust industrial policy recommendation towards an international differentiated oligopoly. However, in this paper, we show that this result does not carry over to the case of a Bertrand homogeneous duopoly. This result together with the fact that the optimal industrial policy is to set an investment subsidy when in product market competition firms play a Cournot output game, imply immediately that there hardly exists a robust industrial policy recommendation towards homogeneous goods industries.     

COOPERATIVE MANAGERIAL DELEGATION,R&D AND COLLUSION

Existing literature on managerial delegation indicates that collusive outcomes can be obtained in an oligopoly game through cooperative managerial delegation. In contrast, this paper shows that, if managers are delegated to choose R&D, in addition to choosing production levels, full‐collusive outcomes cannot be achieved through cooperative delegation. Moreover, (i) under cooperative delegation, semi‐collusion always yields lower profit, higher R&D, higher price and lower social welfare than that in the case of competition and (ii) cooperative delegation leads to a higher profit lower R&D, higher price and lower social welfare than the no delegation case, irrespective of product market conduct.     

Monetary policy transmission under different banking structures: The role of capital and heterogeneity

This work deals with the transmission of monetary policy through the bank loan market, in the presence of a capital requirement regulation. Unlike standard models, based on the “representative bank” shortcut, we adopt the heterogeneous agents approach: this allows us to explicitly model the strategic interaction between well-capitalized and under-capitalized banks. The main results are the following. (I) The propagation of a monetary policy impulse through the loan market differs considerably, depending on the market structure: under monopolistic competition, strategic complementarity among well-capitalized banks leads to a “multiplier effect”; in the Cournot oligopoly framework, an effect of the opposite sign is at work, due to strategic substitutability. (II) Well-capitalized banks are more important, in shaping the adjustment following a monetary policy shock, than what is implied by their relative number over total; this fact strengthens the monetary policy effectiveness. This result holds under both monopolistic competition and oligopoly, although the interaction among banks, leading to such a result, differs across the two banking structures.     

PROMOTING INNOVATION AND THE DEPLOYMENT OF ADVANCED TELECOMMUNICATIONS SERVICES TO BUSINESSES

This paper examines the concomitant effects that competition, regulation, market characteristics, and corporate ownership have on the deployment of advanced telecommunications services (ATS) to business customers through the econometric analysis of a rich data set that identifies the competitive, regulatory, and economic climate for each incumbent's wire center in the United States. The authors conclude that local competition, inter-LATA (local access and transport area) approval by the Federal Communications Commission, and high unbundled network element price to embedded cost ratios have positive impacts on the deployment of ATS, while voluntary federal price cap regulation and location in a rural area have negative impacts. ( JEL L51, O32, M21)     

我国航空运输服务业的市场结构及价格竞争策略分析

我国航空运输服务业从宏观上分析具有寡头垄断的市场结构特点,从航线运营的角度分析却具有垄断竞争的特点,因此我国航空运输服务市场还处在重要的发展变革阶段。在我国空运市场特定的经济环境下,旅客的购买决策受到多种因素的影响,航空公司的价格竞争主要表现为不同价格的子舱位数量的决策,并且具有复杂的价格体系。在同一航线上经营的不同企业一方面要针对价格需求弹性大和时间需求弹性大的旅客采取强硬的价格竞争策略；另一方面也要注重差异化价格竞争策略, 避免恶性竞争的发生。     

新“国五条”的两种可能结果：一个基于理性预期的分析——以天津市为例

2013年2月20日,国务院常务会议决定加强房地产市场调控力度,出台了新“国五条”。新“国五条“继承了中央紧缩的房地产市场调控思路,进一步打压房价,限制二手房交易并鼓励保障性住房建设,尤其是其规定的对个人二手房销售者按照销售收入征收20％的个税更是引起国内一片争论,许多二手房持有者急于在新政策实行前出手自己的房屋。事实上,新“国五条”是一把双刃剑,在取得房价可以预期的立竿见影的下跌的同时,为未来的房地产市场甚至中国经济埋下了隐患,这些隐患究竟是什么,如何做可以避免这些隐患,从这些问题出发,提出了一些建议,有一定的参考价值。     

SPATIAL PERFECT COMPETITION: A UNIFORM DELIVERED PRICING MODEL

Abstract.  Spatial competition is often probed in terms of spatial oligopoly and/or monopolistic competition in the literature. This paper considers spatial competition as a form of perfect competition, in the sense that the firms are assumed to be price-takers located at the centre of a market area and practising uniform pricing. It shows that under scale economy competitive equilibria can occur, and may actually be observed in the form of international price differentials. Both a very high price and a very low price can yield conditions of competitive equilibrium in spatially or otherwise separate markets.     

垄断、竞争与管制、中国铁路改革

西方产烽组织理论中的SCP基本框架对中国铁路行业的市场结构，企业行为经济进行证分析有很有效。中国铁路行业相当高的行业集中度、规模经济性以及进入退出障碍表明中国铁路行业是一个高度垄断的产业；其政企合一、运输质量低下，运价不合理等为弊端亟待解决，从主要技术指标和经济效益指标来看，中国铁路改革空间很大，兼顾竞争与管制，从政企分离，非自然垄断与自垄断业务相分离的原则出发，网络分离是中国铁路运输管理体制改革的必然选择。     

Measuring market power in multi-product oligopolies: the US meat industry

This paper develops and estimates an economic model for measuring market power in a quantity-setting oligopoly engaged in the joint production of demand-related goods. The model, which allows for firms' conjectures about both same and cross-market responses to own output variation, is applied to the US meat (beef and pork) industry. He hypothesis that the industry's equilibrium reflects price taking behaviour is rejected. The hypothesis of no cross effects cannot be rejected. Roughly, half of the farm-to-retail price spreads for beef and pork appear to be attributable to market power.     

Tariffs,R&D,and two merger policies

We compare welfare-increasing and consumer-surplus-increasing merger policies in an oligopoly when merging firms face endogenous trade policies, and engage in cost-reducing R&D activity. As R&D becomes less efficient, the equilibrium market structures (EMS) become less concentrated under both merger policies. When R&D is very efficient, monopoly becomes the EMS under the welfare-increasing merger policy. This occurs as the absence of tariff and efficient R&D under monopoly limit the price increase and the gain in profits outweighs the loss in consumer surplus and tariff revenue. The results suggest that trade policies should take into account merger policies and industries' R&D efficiency. The results also show that global welfare maximization requires global merger policy coordination.     

寡头垄断:优化产业市场结构的选择

长期以来,人们从微观经济理论出发,认为竞争是有效的,垄断是无效的。但从世界范围内的产业发展来看,寡头垄断是当今国际市场结构发展的主流,为了优化中国产业市场结构,改善产业组织绩效,本文认为应对市场结构的效率进行重新认识,并提出了优化中国产业市场结构的选择。     

Trade Policies for Exporting Industries under Free Entry

This paper computes optimal export taxes and domestic production subsidies for exporting industries under free entry. We show that domestic welfare is not at maximum, as is typically believed, when the export price is a monopoly price, and the domestic price is a competitive price, because a market structure effect has to be taken into account. Furthermore, we show that the optimal tax/subsidy formulas for an oligopoly coincide with those under perfect competition, if foreign and domestic demand functions are both linear. We also discuss optimal trade policies when only one instrument is available, and we run numerical simulations to determine and compare optimal trade taxes under endogenous and exogenous market structures.     

中国汽车工业市场结构变迁及其成因

为揭示我国汽车工业的结构演进过程，以更好地引导发展，本文运用产业组织理论对我国汽车工业市场结构变迁及其成因进行了梳理。研究表明，我国汽车工业发展史可分为五个阶段，各阶段的市场结构特点、成因、竞争程度均有很大差异，其中政府和市场影响呈现此消彼长的局面，但政府角色更关键。政府一系列行为旨在塑造由国营车企主导的高集中度市场结构，但行政主导式的高集中寡占型市场结构由于缺乏有效市场竞争，因而市场结构始终与较强的市场势力和不完全竞争相联系。此外，本文还运用博弈论探讨了现阶段“多角联盟”下的企业行为，分析表明该结构下的价格合谋更具稳态性。     

Export rivalry and exchange rate pass‐through

In this paper, we investigate the influence of market rivalry on firm‐level exchange rate pass‐through. Similar to Bloom et al. Econometrica, 80 , 1347–1393 (2013), we define market rivalry as product market proximity, and expect the cross market spillovers, that is, through leaked information or reputation, to affect firm‐level export price. Using a comprehensive dataset from Chinese exporters for the 2000–2007 period, we find that in response to a higher degree of market rivalry firms are less responsive to exchange fluctuations. This unresponsiveness suggests a higher degree of exchange rate pass‐through. The influence of market rivalry is stronger among firms that export consumption and heterogeneous products, and to developed countries. Our results are robust to different measures of market rivalry and specifications.     

Strategic competition and optimal parallel import policy

Abstract In a two‐country Hotelling type duopoly model of price competition, we show that parallel import (PI) policy can act as an instrument of strategic trade policy. The home firm’s profit is higher when it cannot price discriminate internationally if and only if the foreign market is sufficiently bigger than the domestic one. The key mechanism in the model is that the home firm’s incentive to keep its domestic price close to the optimal monopoly price affects its behavior during price competition abroad. We also analyze the welfare implications of PI policies and show that our key insights extend to quantity competition.     

The impact of brand selection on price competition - a double-edged sword

Brand selection - the number of alternative brands of a particular product - is a double-edged sword in that on the one hand it increases rivalry and so stimulates price competition but on the other hand it causes consumers to be poorly informed and thus vulnerable to exploitation and so dampens price competition. This phenomenon is demonstrated analytically and empirically, with analytical work based on Hotelling's unit market line. Using price dispersion as a measure of the state of price competition, it is shown that a widening in price dispersion, that is, a lessening of price competition, arises from an increase in brand selection. Any increase in the number of alternative brands on offer (brand selection) causes an increase in ‘DIF-ness’ (Distortion in Information Function) which in turn causes an increase in price dispersion (a lessening of price competition). The phenomenon is demonstrated empirically through a small survey of household beverages.