Potential competition and the factors influencing banking concentration

Multiple regression analysis is used to study the factors influencing market concentration in urban banking markets. The results indicate that independentde novo entry and shifts in population from the central city to the suburbs can be important deconcentrating factors in urban banking markets. In terms of the potential competition doctrine, the results suggest that attractive banking markets are likely to attract enough actual and potential entrants to mitigate any problems associated with a leading bank acquisition by a potential entrant. On the other hand, potential competition is more likely to be an issue in less attractive banking markets where the probability of entry is low.     

Potential foreign competition in US manufacturing

Trade barriers are falling and firms are competing in increasingly open international markets. The data reveal considerable heterogeneity across industries in the intertemporal path of import-shares. Against this backdrop, we focus on an issue that is increasingly important for competition policy analysis: ‘potential’ foreign competition. Inadequate attention to this aspect could result in a biased picture of total competition, leading to misguided antitrust decisions. Drawing on the conceptual framework outlined by Landes and Posner [Harvard Law Review, 94 (1981) 937], we measure potential foreign competition by the intertemporal response of industry import-share to industry-specific and aggregate economic factors, and our estimates indicate wide variation across industries in this dimension. A particularly striking finding is that highly concentrated industries, which are more likely to be subject to antitrust scrutiny, have a greater degree of potential foreign competition than industries with low concentration, even though the extent of actual foreign competition is similar across these groups of industries.     

Telecommunications infrastructure competition in Greece: Potential scenarios for future debates

In the light of the forthcoming liberalization in the provision of public voice telephony services and infrastructure in the European Union (EU), particular concerns have been expressed with regard to the realization of these competition principles in the less favoured regions. This article discusses the case of Greece, the country which has traditionally lagged behind other member states in both network infrastructure and institutional reorganization of the sector. Evidence from documentary and interview-based research shows that, although little progress has been made in liberalization policy and practice, underlying trends expressed by domestic and foreign actors could lead to a situation where signs of infrastructure competition may appear.     

Innovation and competition: The role of the product market

We study how competition impacts innovation (and welfare) when firms compete both in the product market and in innovation development. This relationship is complex and may lead to scenarios in which a lessening of competition increases R&D and consumer welfare in the long run. We provide conditions for when competition increases or decreases industry innovation and welfare. These conditions are based on properties of the product market payoffs. Implications for applied work and policy are discussed.     

On the role of empirical industrial organization in competition policy

In this paper I consider the role of empirical industrial organization (IO) in competition policy. In particular, I consider the effect of the institutional setting in which competition policy is developed on the diffusion of ideas and techniques emerging from the empirical IO literature. In doing so my aims are two fold. First, I aim to understand the areas of competition policy most likely to provide fertile ground for future work, and those which are less likely to have an impact. And second, I hope to make a small step towards ensuring that the important potential synergies between competition policy and empirical IO are more fully developed — to the benefit of both communities and, more importantly, the public. This paper necessarily draws heavily on my experience in the UK, but many remarks may resonate more generally.     

Local competition and the role of regulation: the EU debate and Britain's experience

Competition in local access networks and local loop unbundling have been central in the 1999 review of the EU communications regulatory framework. These issues also figure high on national policy agendas. Competition in local access is thought to stimulate internet penetration and the development of e-commerce and interactive applications, all key elements for the move towards a ‘new economy’. Following an analysis of different ways to promote competition in local access networks and a review of the respective EU debate, this paper then concentrates on the relevant developments in Britain. At a broader level, it explores the interplay between EU debates and British policies and actions and the scope for harmonisation of national regulatory regimes. At a more specific level, the paper assesses the evolution of local access competition and relates this to the role of regulation and the question of facilities- vs. services-based entry. It is argued that the introduction of new market restructuring initiatives, such as local loop unbundling, requires a larger involvement by regulators, particularly in the early stages, rather than just a reliance on general competition rules.     

Spectrum limits and competition in mobile markets: the role of licence fees

The paper discusses the impact of scarcity of frequency spectrum on the performance of the mobile telecommunications industry. An oligopoly model with endogenous sunk costs illustrates the trade off between ex ante extraction of oligopoly rents and market entry of firms. The determination of the licence fee through an auction provides scope for setting market structure endogenously: the higher the licence fee, the lower the number of firms sustained by the market. High licence fees may be a signal for post-entry collusion. Differences across national regulatory frameworks with respect to the conditions for allocation of spectrum licenses may induce problems of fair competition in an integrated market.     

Endogenous capacities and price competition: The role of demand uncertainty

We analyze the role of demand uncertainty in markets of fixed size, in which firms take long-run capacity decisions prior to competing in prices. We characterize the set of subgame perfect Nash equilibria under various assumptions regarding the nature and timing of demand uncertainty. In order to prove equilibrium existence, we identify a sufficient condition for the capacity choice game to be submodular. This condition resembles the standard downward-sloping marginal revenue condition used in Cournot games. A robust conclusion of the analysis is that equilibrium capacity choices are asymmetric, even when firms are ex-ante identical. Concerning the equivalence between the capacity-price game and the Cournot game, we find that with inelastic demands, the equilibria of the former belong to the equilibrium set of the latter. However, as compared to the Cournot game, the capacity-price game leads to lower prices and generates price dispersion.     

Entry deterrence and dynamic competition : The role of capacity reconsidered

We study a model with sequential capacity choice and entry by firms into an industry. Post-entry competition is long term and firms compete by choosing prices. The complex role played by the capacity choice of the first mover is highlighted. In contrast to the conclusions derived from static or reduced form specifications, entry may be deterred only by choosing a low capacity level and charging a very high price. The arguments are used to provide an explanation of events in the U.S. phosphorus industry.     

‘Keep out’ signs: the role of deterrence in the competition for resources

To explain resource heterogeneity, past research focuses on how rivals' resources are hidden from firms and firms accordingly have difficulties accessing them. We argue that resource heterogeneity may also arise when firms are deterred from a technological space upon being shown what resources rivals already possess within that space. To illustrate this deterrence effect, we use patent reexamination certificates, which indicate strategic stakes within a technological space without materially disclosing additional details of the underlying technologies and hence avoid the confounding effect of attracting competition through disclosure. We demonstrate how rivals' reexamination certificates within a technological space induce a firm to subsequently allocate less inventive effort in that space, based on two mechanisms—indications of rivals' developmental speed and exclusionary ability. We further develop these two mechanisms by arguing that the deterrence effect is stronger when rivals' speed is enhanced by their downstream capabilities, or when rivals' exclusion is enhanced by their litigation experiences. Findings suggest that a firm's path of resource accumulation evolves through avoidance of rivals' paths, and deterrence may constitute a viable alternative theory of resource heterogeneity. Copyright © 2010 John Wiley & Sons, Ltd.     

The role of online platforms for media markets — Two-dimensional spatial competition in a two-sided market

We analyze the market for online and offline media in a model of two-dimensional spatial competition where media outlets sell content and advertising space. Consumer preferences are distributed along the style and type of news coverage where the distance costs may vary across dimensions. For integrated provision of online and offline platforms we show that entering the online market reduces average profits and may even constitute a prisoner's dilemma. Specialized provision may yield polarization in the style and type dimensions. This is in contrast to the maximum–minimum differentiation result previously established in the literature on multidimensional horizontal competition. We show that maximal differentiation in both dimensions occurs due to the discrete nature of the type dimension and asymmetric advertising markets.     

Spectrum allocation and its relevance for competition

Spectrum is one of the most important production factors for mobile telecommunications operators. Spectrum policy is paramount as spectrum is a scarce resource allocated by regulatory authorities. Hence, when allocating spectrum and determining the potential use of spectrum, the regulatory authorities have a significant influence on the competitive situation in mobile markets.     

Local competition for telephone services

A policy discussion and overview of the development and scope of local exchange competition in U.S. Telecommunications markets is presented. The primary focus is on access and cable competition. In the future, we will see policies which encourage cable to enter telephone services, telephone companies to develop a video dialtone, and transportation networks which allow interexchange carriers to bypass the access charges of the local network. Regulatory policy needs to manage these competitive changes so that there is parity between the various service providers.     

Entry,imperfect competition,and futures market for the input

We analyze firms' entry, production and hedging decisions under imperfect competition. We consider an oligopoly industry producing a homogeneous output in which risk-averse firms face an entry cost upon entering the industry, and then compete in Cournot with one another. Each firm faces uncertainty in the input cost when making production decision, and has access to the futures market to hedge the random cost. We provide two sets of results. First, under general assumptions about risk preferences, demand, and uncertainty, we characterize the unique equilibrium. In contrast to previous results in the literature (without entry), both production and output price depend on uncertainty and risk aversion. Specifically, when entry is endogenized and the futures price is not actuarially fair, access to the futures market does not lead to separation. Second, to study the effect of access to the futures market on entry and production, we restrict attention to constant absolute risk aversion (CARA) preferences, a linear demand, and a normal distribution for the spot price. In general, the effect of access to the futures market on the number of firms and production is ambiguous.     

Investment flexibility and competition modeling for broadband business

In the new era of the telecommunications business field, a large number of potential investors are capable of entering into the market of the broadband services provision. This paper provides a model for analyzing the new perspectives for new investors in this field. It integrates compound Real Options and Game Theory techniques and adopts price competition analysis, for the broadband services provision, in order to find the optimal business strategy. Finally, it applies the analysis to a real life business case by formulating and solving it.     

Global developments in the competition for land from biofuels

The potential global demand for biofuels and the implications of this for land use and its interaction with food agriculture is reviewed. It is expected that biofuels will form an important element of global transport energy mix (in the order of 20–30% of total requirement) over the next 40 years and beyond. Over this time, there will be a transition from so called first generation biofuels, based on commodity agricultural crops with food/feed uses, to advanced biofuels, sometimes called second and third generation biofuels, based primarily upon lignocellulosic feedstocks. It remains unclear whether these advanced biofuels, based on lignocellulosic materials, will entirely replace first generation or if second generation will be supplemental to first generation. This expansion in biofuels will be coupled to a substantial increase in alternative fuels (electricity, hydrogen, biogas and natural gas) and modal shifts. Biofuel production from agricultural commodity crops that exhibit strong sustainability criteria will remain important (e.g. sugarcane) with supportive and competitive aspects for food security.Land requirement projections estimated for a range of potential biofuel development trajectories range widely and are inherently uncertain. Under the most active scenario that delivers substantive greenhouse gas reductions in transport by 2050 (relative to 2005 levels), approximately 100 Mha of additional land is projected. In the ‘business-as-usual’ scenario, in which transport energy demand rises by 80% by 2050 from present levels, a land use requirement of 650 Mha is projected.Significant potential exists for producing biofuels that possess high productivity and sustainability profiles through continued research, development and demonstration. Policy and regulation at a global level, that focuses biofuel development on these goals in ways that are synergistic with food agriculture, will simultaneously help to decarbonise transport and maintain a diverse and financially robust agricultural (and forestry) sector.     

The effect of export marketing capabilities on export performance: Moderating role of dysfunctional competition

This study utilizes multiple-informant and time-lagged primary data from 162 industrial exporting firms in Sub-Saharan Africa to contribute to an understanding of when export marketing capabilities can be deployed to drive export performance. The study finds that market responsiveness capability drives export performance when it is deployed together with a product innovation capability. The joint effect of both capabilities on export performance is weakened at high levels of dysfunctional competition in export market environment. The findings suggest that a stronger capability to respond to export market needs and a greater competence in introducing new products in export markets are not always beneficial in Sub-Saharan African markets as the resulting export performance outcome is dependent upon degrees of dysfunctional competition.     

Oligopolistic competition,IT use for product differentiation and the productivity paradox

Empirical studies suggest that the huge investment in information technologies (IT) of the past two decades has led to no significant increase in productivity; this phenomenon is known as the ‘productivity paradox’. It has been argued that the paradox might result from oligopolistic competition: because of strategic interaction, each individual firm might find it profitable to invest in cost-reducing IT, but total investment might then be excessive from the industry’s point of view. I confirm this view and strengthen it by allowing IT investment to be also devoted to product differentiation which makes the productivity paradox more likely. The emergence of Web-based electronic commerce provides an illustration of the forces identified in the model.     

International competition policy and telecommunications. Lessons from the EU and prospects for the WTO

The changes in the international telecommunications market are rapidly outgrowing the existing structure of regulation. Moreover the trends in the sector indicate that if the Most Favoured Nation (MFN) rule is to be viable some form of international competition policy is needed. This must tackle the difficult problems of market access, joint ventures and anticompetitive behaviour and most importantly prevent the different approaches to these problems leading to trade frictions, especially in the USA. Such rules have proved difficult, but not necessarily impossible, to develop as the stalled talks within the World Trade Organisation (WTO) have shown. The paper considers the possible relevance of developments within EU telecommunications regulation where a competition policy-led regime is emerging.     

Managing business and social network relationships in Russia: The role of relational capabilities,institutional support and dysfunctional competition

The current study provides empirical insight into the nature of creating relational rents when managing business relationships in the context of the emerging Russian economy. Addressing both formal and social business network relationships, the study aims to understand the role of a systematic and purposeful approach to building and managing business relationships in order to generate superior relational advantage. The study explores the effects on both subjectively and objectively measured relational rents. Additionally, the role of institutional context in both shaping relationships and obtaining relational rents is considered through the inclusion of dysfunctional competition and institutional support. The results of a survey on a sample of 148 business-to-business firms demonstrate the leading role of the business relationship portfolio in generating relational rents, as well as the supporting role of relational capabilities in building this relationship portfolio. These effects are significantly affected by institutional moderators, demonstrating multidirectional effects on the mechanisms behind building relationships and obtaining the associated relational advantage.