Market structure and competition in transition: results from a spatial analysis

The present article provides first microlevel (indirect) empirical evidence on changes in entry barriers, the determinants of firm profitability as well as the nature of competition for a transition economy. We estimate size thresholds required to support different numbers of firms for several retail and professional service industries in a large number of geographic markets in Slovakia. The 3 time periods in the analysis (1995, 2001 and 2010) characterize different stages of the transition process. Specific emphasis is given to spatial spill-over effects between local markets. Estimation results obtained from a spatial ordered probit model suggest that entry barriers have declined considerably (except for restaurants) and that the intensity of competition has increased on average. We further find that demand spill-overs and/or the effects associated with a positive correlation in unobservable explanatory variables seem to outweigh negative spill-over effects caused by competitive forces between neighbouring cities and villages. The importance of these spatial spill-over effects differs across industries.     

Vertical Specialization and International Business Cycle Synchronization*

We explore the impact of vertical specialization—trade in goods across multiple stages of production—on the relationship between trade and business cycle synchronization across countries. We develop an international business cycle model in which the degree of vertical specialization varies with trade barriers. With perfect competition, we show analytically that fluctuations in measured total factor productivity are not linked across countries through trade. In numerical simulations, we find little dependence of business cycle synchronization on trade intensity. An extension of the model to allow for imperfect competition has the potential to resolve these shortcomings.     

横向竞争、垂直分离与产业集群

与地理经济学对产业聚集动因的解释角度不同，本文通过发展一个包含横向竞争的模型证明，集群的好处在于形成一个横向竞争的有效率的中间产品市场，有效减少垄断加价问题，引致“市场对企业的替代”．使得生产的组织方式由垂直一体化转向垂直分离，提高了分工水平和经济增长的效率。     

BERTRAND Vs. COURNOT COMPETITION WITH UPSTREAM FIRM INVESTMENT

This paper compares Bertrand and Cournot competition in a vertical structure in which the upstream firm sets the input price and makes R&D investments. We show that from the downstream firms’ point of view, Cournot competition has the advantage of a more monopolistic effect, leading to the setting of a higher price, but has the disadvantage of inducing a lower incentive for the upstream firm to invest. On the other hand, Bertrand competition has the advantage of providing a greater incentive for the upstream firm to invest but has the disadvantage of a more competitive effect, leading to the setting of a lower price. Our main findings are as follows. First, R&D investment level is greater under Bertrand competition than under Cournot competition. Second, from the standpoint of the upstream firm and industry, Bertrand competition is more efficient than Cournot competition. Third, from the standpoint of the downstream firms, Bertrand competition is more efficient than Cournot when investment is sufficiently efficient and products are sufficiently differentiated.     

中国企业的需求导向创新实证研究

This paper analyzes the interrelationship among competition, market size and innovation by using the data from total 37 industries in China within a simultaneous equations model. It finds that: (1) Competition and innovation are mutually-enhanced, and this is the consequence of the long-run Darwinian effect in competitive market; (2) Market size and innovation are also positively correlated, because firms’ innovation is essentially demand-oriented (market-oriented), and innovation impelling technological progress will finally increase market size; (3) Between competition and market size, the effect of competition on market size is ambiguous, while the reverse is significantly positive. The policy implication of this paper is as follows: under the condition that China has especially huge market size and market demand, the industry policy of intensifying competition can stimulate firms’ persistent demand-oriented innovation.      

Price and quantity competition under free entry

This paper complements that of Cellini et al. (Cellini, R., Lambertini, L., Ottaviano, G. I. P., 2004. Welfare in a differentiated oligopoly with free entry: A cautionary note. Research in Economics, 58:125–33.), which shows that Cournot competition may generate higher welfare compared to Bertrand competition in an economy with free entry. Unlike them, we provide a more general proof for this result and show that Cournot competition generates higher welfare compared to Bertrand competition when the products are sufficiently differentiated. If the products are close substitutes, welfare is higher under Bertrand competition. We show that these qualitative results hold whether or not number of varieties increases market size. We also show when the active firms earn higher profits under Bertrand competition compared to Cournot competition.     

零售商买方势力一定会导致通道费吗？--基于纵向市场结构的合作博弈分析

关于通道费的研究,有一种观点认为通道费是零售商买方势力的体现。但是现实经济中有些具有买方势力的零售商收取通道费,而另一些却不收取通道费,买方势力的观点不能对这一现象作出解释。针对此,构建双边双寡头的纵向市场结构模型,并在模型中引入零售商的价格竞争和服务竞争,在合作博弈的框架下分析研究了零售商买方势力与通道费之间的关系。研究发现买方势力并不是出现通道费的充分条件,而只是必要条件,通道费的出现与否除了与零售商买方势力有关外,还与其他的市场环境因素有关。最后,通过线性需求函数的特例对这一结论进行了验证,并在此基础之上提出了相应的规制政策建议。     

Pre-empting technology competition through firm acquisitions

This paper shows that firms engage in horizontal mergers and acquisitions to pre-empt competition in technology markets. Making use of the patent application procedure at the European Patent Office we introduce a measure for potential entry barriers in technology markets.     

More competition to alleviate poverty? A general equilibrium model and an empirical study

In this paper, we theoretically and empirically analyze the impact of competition on poverty. We consider a general equilibrium framework with vertical preferences and compare poverty in a Monopoly setting versus a Duopoly setting considering explicitly the ownership structure. Poverty is measured by the size of the population living below an absolute poverty line. Theoretical results show that the impact of competition on poverty is contingent to the ownership structure, the poverty line and the relative dispersion of the individuals with respect to their intensity of preference for quality and sensitivity to effort: competition can improve or worsen poverty depending on the model's parameters. Empirical findings for the three existing poverty lines ($1.9, $3.2, and $5.5) are consistent to a large extent with our theoretical results.     

市场结构对FDI行业间溢出效应的影响

近年来,对FDI的一些研究发现,行业间溢出(尤其是后向溢出)是FDI溢出的一个重要途径,FDI行业间溢出的影响因素很多,其中市场结构是聊后向溢出的一个重要影响因素.本文通过理论分析研究了上下游行业不同市场结构,以及FDI所在行业中本国企业数目对行业间溢出效应的影响发现,随着上下游行业市场集中度的降低,行业间溢出效应逐渐增大;随着FDI所在行业中本国企业数目的减少,行业间溢出效应也逐渐增大.     

The welfare cost of imperfect competition and distortionary taxation

The welfare cost of imperfect competition in the product and labor markets in the United States is quantified in a dynamic general equilibrium model. We find that the welfare cost of imperfect competition in the product market is 3.62 percent while it is 0.58 percent in the labor market, taking the transition path from the distorted to the optimal steady state into account. If we also take into account that the US economy is characterized by distortionary taxation, the welfare cost of the product market distortion increases to 13.51 percent and the labor market distortion to 4.35 percent.     

Cartel sustainability with vertical product differentiation: Price versus quantity competition

In the context of a vertically differentiated duopoly, we analyse the influence of the degree of differentiation on cartel sustainability, under both price and quantity competition. We find that, under both Bertrand and Cournot competition, the effect of vertical product differentiation on sustainability of the collusive equilibrium is unclear. It is shown that, given a degree of differentiation, price collusion is more sustainable than quantity collusion.     

Trade policy and quality leadership in transition economies

Trade policy and quality leadership in transition economies are analyzed in a duopoly model of trade and vertical product differentiation. We first show that the incidence of trade liberalization is sensitive to whether firms in transition economies are producers of low or high quality. Second, we find that neither free trade nor the absence of a domestic subsidy are optimal: Both a tariff and a subsidy increase price competition and while the former extracts foreign rents the latter results in quality upgrading. Third, there exists a rationale for a government to commit to a socially optimal policy to induce quality leadership by the domestic firm when cost asymmetries are low. Finally, we establish an equivalence result between the effects of long-run exchange rate changes and those of trade policy on price competition (but not on social welfare).     

Competition, entry and the social returns to infrastructure in transition economies

This paper presents a simple model for analysing the contribution of investments in physical and institutional infrastructure to the transition process. In addition to the direct cost savings, infrastructure investment generates important indirect effects, or transition impacts . The model shows that, by reducing transaction costs, infrastructure intensifies product market competition. This leads to more effective weeding out of the existing high-cost firms in the market. In this model, infrastructure also increases the incentives for low-cost firms to restructure which generates additional efficiency gains, but exacerbates the existing cost asymmetry in the economy. Finally, infrastructure investment enhances the incentives for relatively low-cost firms to enter the market, and thus improves the efficiency of the entry process. The importance of these transition impacts of infrastructure is dependent upon features of the economy, such as the degree of cost asymmetry among firms, the proportion of high-cost firms, the cost of restructuring and entry costs for new firms.
JEL classification: L1, O1, P2.     

Competition and product cycles with non-diversifiable risk

This paper analyzes the growth effects of competition in a product-cycle model with innovation, imitation and non-diversifiable risk. Imitation leads to oligopolistic competition and innovation restores a monopoly in the market. In contrast to the models that assume diversifiable risk, this paper shows the following. Positive profits in the oligopoly stages of the product cycle are necessary for technological change. A little intensity of competition is growth diminishing. Only if the intensity of competition exceeds a critical level, its increase enhances growth.      

The rise and fall of monopolistic competition revolution

The widespread idea among economists is that monopolistic or imperfect competition is a set of realistic models that were invented in the 1930s and their purpose was to fill the gap between the polar and, at the same time, hypothetical models of perfect competition and pure monopoly. The main argument of this paper is that the monopolistic competition revolution set in motion a reaction—partly driven by methodological considerations, partly ideological—that ultimately led to the restoration of perfect competition, as the benchmark for evaluating market outcomes. In the end, monopolistic competition eclipsed, and perfect competition from the fridges of economic analysis that was up until the 1920s was placed to the very core of microeconomic model-building.

Competition schemes and investment in network infrastructure under uncertainty

This paper compares two specific types of competition schemes—service-based and facility-based competition—by focusing on a firm’s incentive to invest in network infrastructure. We show that when monopoly rent is large, facility-based competition means that the initial introduction of infrastructure is made earlier than under service-based competition. However, when monopoly rent and the degree of uncertainty are both small, service-based competition brings about the earlier initial introduction of infrastructure than facility-based competition. The paper includes discussion of the policy implications of these findings.      

How to measure competition in an economy in transition

This paper attempts to find a robust method of measuring competition when firms' operational activities are subject to frictions. The first part theoretically tests the indicative quality of two competition measures, the price‐cost margin (PCM) and the profit elasticity, in a model of monopolistic competition. The second part studies the empirical performance of the indices for a panel of Ukrainian manufacturing firms. This study offers a new approach to measuring profit elasticity that relies on structural estimation of a production function. The estimation methodology retrieves a productivity index that is adjusted to imperfect competition. The proposed method of measuring profit elasticity is found to be robust to frictions, but the PCM and traditional profit elasticity are biased, especially when the intensity of competition is low. Empirical findings show that competition exhibits a significantly positive correlation with aggregate productivity performance, while its impact on firm productivity is nonlinear.     

公用企业限制竞争行为的规制

随着中国社会主义市场经济体制的逐步建立和完善,竞争在市场经济中的作用越来越重要,但是一些企业特别是公用企业利用自身的独占地位想方设法限制竞争,扰乱了自由和公平的竞争秩序。为此,有必要对公用企业限制竞争行为进行规制。     

过度竞争的现实与理论

根据国内外市场竞争中过度竞争的现状以及国内外学者对于过度竞争的研究,可以用数理方法证明商品同质化是过度竞争的根源。差异化是规避过度竞争的根本途径,在无法避免差异化的市场领域,必要的政府政策干预是必不可少的。