The Heterogeneous Effects of Trade Protection: A Study of US Antidumping Duties on Portland Cement

For many traded products, high transportation and trade costs can lead to regionally segmented markets, which affect both the pattern of trade and the impact of trade policy. This paper studies the imposition of antidumping duties in the cement industry and finds striking regional variation in their impact on domestic prices, sales and imports. Duties that were imposed on Japanese producers that were shipping cement to the US West-Coast coastal markets led to imperfect substitution to other imports, which allowed domestic prices and production to increase. Imperfect substitution also occurred following duties that were imposed on Mexican producers that were shipping cement to the US Gulf of Mexico coastal markets. But in the US Southwest border markets, the same duties had no impact on the domestic prices of cement. I link the variation in responses across regions to hysteresis that was due to high exit costs.     

An improved maize marketing system for African countries: the case of Zimbabwe

This article proposes a system for Zimbabwe which retains government control of national stocks and enables the parastatal marketing system to stabilize prices, at the same time ensuring a more rational delivery system in rural areas with prices reflecting storage and transport costs. The local population is encouraged to fulfill local needs, thus avoiding the expense of directing all marketing and processing through the urban areas. A more localized system will also have greater multiplier effects. Zimbabwe's maize marketing system is used to show how this system could be modified with benefits to rural consumers, producers and government. Data suggest there is little market exploitation: price differentials between markts reflect transport costs, returns on storage are reasonable, and voluntary procurement operations are usually able to stabilize prices. Zoning, movement restrictions and compulsory procurement have been shown to destabilize food markets; prices between markets are higher in periods of strict control than when marketing is relatively free. Controlled marketing answers a real political and economic need in Zimbabwe. Existing public food marketing agencies are not inherently inefficient. While stabilizing maize supply, there are important advantages in announcing preplanting prices, but any trade in maize only takes place after price setting. It is unlikely that there would be both imports and exports in any 1 year, except when previous contracts are being fulfilled. 2 policy options are available to cover anticipated periods of insufficient national maize production: the maintenance of a strategic reserve; and importation of maize to cover supply shortfalls. Single-channel marketing should be replaced by an internal free market operating between floor and ceiling prices by supply manipulation to prevent excessive producer and consumer welfare fluctuations. This system would be more efficient and have beneficial effects on development. It is more equitable for the rural poor, and result in greater stability of producer incomes, more reliable food supplies, higher producer prices and the release of public funds.     

Structural estimation of price adjustment costs in the European car market

This paper characterizes the price adjustment costs that are consistent with observed price dynamics in the European car market. We estimate a dynamic model of international multiproduct firms that set prices in different currencies while facing price adjustment costs. We find that large price adjustment costs are not needed to rationalize the substantial degree of price inertia we observe in the data. Intuitively, since GDP, wages and exchange rates exhibit such a large degree of autocorrelation, small adjustment costs can explain very persistent prices. Also, accounting for country-specific price sensitivity, wages, GDP and exchange rates, the price adjustment costs should differ substantially across producers and markets to match the data.     

TARGETED ADVERTISING: THE ROLE OF SUBSCRIBER CHARACTERISTICS IN MEDIA MARKETS*

This paper seeks to establish the importance of targeted advertising in media markets. Using zip‐code level circulation for U.S. newspapers, I show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition. I explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics. This leads to greater homogeneity in the characteristics of subscribers and raises advertisers' willingness to pay for such readers. The results imply a substantial benefit to advertisers and media firms from targeted advertising.     

Productive efficiency of specialty and conventional coffee farmers in Costa Rica: Accounting for technological heterogeneity and self-selection

A steep decline in coffee prices at the producer level led to considerable pressure for farmers in Costa Rica and producer countries all over the world. One possible reaction was moving to specialty markets, where price pressure was perceived to be lower. We use original survey data from 2002/2003 and 2003/2004 to analyze the factors influencing participation in specialty markets and to estimate separate production functions for specialty and conventional coffee farmers allowing for farm-specific inefficiencies. Applying a sample selection framework, we find significant selection bias in the sub-sample of specialty farmers and evidence for the overestimation of efficiency, if this bias is not adequately controlled for. Among the most important factors that influence farm-specific efficiency levels in the two sub-samples are the availability of additional income activities, experience in coffee cultivation, and membership in cooperatives. Based on the results, we derive policy recommendations to improve farmers’ production performance and ability to cope with the effects of the coffee crisis. These policy measures include the provision of extension services with respect to farm management skills, the creation of income opportunities in rural areas, and the support of farmer-owned cooperatives.     

Do Low‐Price Guarantees Guarantee Low Prices? Evidence from Competition between Amazon and Big‐Box Stores

It has long been understood in theory that price‐match guarantees can be anticompetitive, but to date, scant empirical evidence is available outside of some narrow markets. This paper broadens the scope of empirical analysis, studying a wide range of products sold on a national online market. Using an algorithm that extracts data from charts, I obtain a novel source of data from online price trackers. I examine prices of goods sold on Amazon before and after two big‐box stores (Target and Best Buy) announced a guarantee to match Amazon's prices. Employing both difference‐in‐difference and regression‐discontinuity approaches, I robustly estimate a positive causal effect of six percentage points. The effect was heterogeneous, with larger price increases for initially lower‐priced items. My results support anticompetitive theories which predict price increases for Amazon, a firm that did not adopt the guarantee, and are consistent with plausible mechanisms for the heterogeneous impact.     

Local impacts of a global crisis: Food price transmission,consumer welfare and poverty in Ghana

This paper takes a local perspective on global food price shocks by analyzing food price transmission between regional markets in Ghana. It also assesses the impacts of food price increases on various household groups. Taking the 2007–2008 global food crisis as an example, we show that prices for domestic grain products are highly correlated with world market prices. This is true both for products for which Ghana is highly import-dependent (e.g., rice) and the products for which Ghana is self-sufficient (e.g., maize). The econometric results also show that price transmission is high between regional producer markets and markets located in the country’s largest cities, and the distance between producer and consumer markets and the size of consumer markets matter in explaining the price transmission. The welfare analysis for households as consumers shows that the effect of world food prices appears relatively modest for the country as a whole due to relatively diverse consumption patterns within country. However, the national average hides important regional differences, both between regions and within different income groups. We find that the poorest of the poor—particularly those living in the urban areas—are hardest hit by high food prices. The negative effect of the food crisis is particularly strong in northern Ghana. The main explanations for this regional variation in the price effect is the different consumption patterns and much lower per capita income levels in the North of Ghana compared to other regions in the country.     

Asset Characteristics and Boom and Bust Periods: An Experimental Study

We examine the impact of transaction costs, short selling restrictions and divisibility of assets on market efficiency in experimental asset markets. We find that transaction costs do not exacerbate the inefficiency of the market. They reduce the magnitude of bubbles and push prices closer to fundamentals. More divisible assets exhibit smaller deviations of prices from fundamentals. Short selling restrictions contribute to prolonged bubbles, while relaxing them increases the occurrence of “bust cycles.” We also find that experimental real estate markets display larger deviations of prices from fundamental values, longer boom and bust cycles and smaller turnover than experimental financial markets.     

Search Costs, Lags and Prices at the Pump

Evidence is mounting that long lags and asymmetric price responses to changes in wholesale prices are characteristic of many retail markets. Although long lags are often attributed to search costs, little empirical evidence exists to support this claim. The analysis offered in this paper compares price responses in gasoline and diesel markets in 15 U.S. cities. Search costs vary across these two markets, and the evidence indicates a much faster response in the diesel market where search costs are lower. Asymmetric responses, where prices rise faster than they fall, are also evident in the data. While asymmetric responses have been attributed to oligopolistic behavior, the arguments presented in this paper point to search theory as an alternative explanation.     

Estimating Market Power in the US Copper Industry

Before 1978, most of the domestic copper production in the US and an important share of imports were traded at a price set by the major US producers. At the same time, the rest of the world was trading copper at prices determined in auction markets. This two-price system ended in 1978, when the largest US producers began using the Comex price of refined copper as a benchmark for setting their prices. Using this regime shift, I empirically test the competitive behavior of the US copper industry before 1978. The results show that copper prices were close to the levels predicted by a competitive model of the industry.     

Efficiencyv. collusion: Evidence cast in cement

Through the 1970s and 1980s, the U.S. portland cement industry experienced a significant increase in average plant size and market concentration. A simultaneous equation model is developed to examine the effects of plant size and concentration on costs, prices and margins in that industry. The results indicate the presence of significant scale economies, but also show that prices and margins are increasing in concentration. Further analysis shows that almost one third of the cost savings associated with larger plants are passed on to producers through higher margins resulting from concomitant increases in concentration, rather than to consumers as lower prices.     

Successive Oligopolies with Differentiated Firms and Endogeneous Entry

We develop a model of successive oligopolies with endogenous entry, allowing for varying degrees of product differentiation and entry costs in both markets. We show that downstream conditions dominate the overall profitability of the two‐tier structure while upstream conditions mainly affect the distribution of profits. We analyze how two‐part tariffs and resale price maintenance shape the endogenous market structure and study their welfare effects. In contrast to previous literature, we find that welfare under linear prices can be larger than under twopart tariffs although the latter avoids double marginalization. This is because linear prices induce more downstream market entry.     

The Economics of Retailing Formats: Competition Versus Bargaining

We set up a merger game between retailing stores to study the incentives of independent stores to form a big store when some consumers have preferences for one‐stop shopping. Such one‐stop shopping creates complementarity between products, leading in turn to lower prices after a big store is formed but may also lead to an improvement in the bargaining position vis‐à‐vis producers through the creation of an inside option that small stores do not have. We find that big stores will not be formed when the stores' ex ante bargaining power vis‐à‐vis producers is high. Otherwise, an asymmetric situation occurs with only one big store created when one‐stop shoppers are abundant.     

Mechanism choice and the buy-it-now auction: A structural model of competing buyers and sellers

A striking feature of many online sales platforms is the coexistence of multiple sales mechanisms. Items on eBay, for instance, are frequently offered through auctions, posted prices, and buy-it-now auctions. In this article, I study how this mechanism multiplicity influences the welfare of buyers and sellers. I specify and estimate a structural model of mechanism choice in online markets, in which I consider both sides of the market: On the demand side, buyers' choices among available listings are equilibrium outcomes of an entry game. On the supply side, sellers make equilibrium decisions when choosing sales mechanisms and prices. I estimate this model using data from sales of baseball tickets on eBay and calculate consumer and seller rents in three markets: the actual market with all three sales mechanisms and two counterfactual markets with auctions and fixed prices or only fixed-price listings, respectively. I find that the addition of auctions to fixed-price markets hurts sellers and risk-averse buyers but benefits risk-neutral buyers. Additionally, the consumer surplus increases when buy-it-now auctions are offered but the seller surplus is reduced further. I discuss the intuition for the cause of this result.     

Heterogeneous incentives for innovation adoption: The price effect on segmented markets

It is now commonly accepted that poverty alleviation and the development of agricultural value chains in low income countries require farmers to innovate. However numerous constraints to innovation adoption have been identified. In the literature, the market structures on which producers sell their output have received remarkably little attention. In this article, I argue that these can impact a producer’s choices with respect to the level of effort invested in changing agricultural practices. More specifically, due to transaction costs, contract farming and other market imperfections, output prices and production levels in rural areas are often jointly determined, leading to market segmentation. I develop a simple model to discuss how market segmentation induces non-trivial effects on incentives to innovate. Next, I rely on farm-level panel data from an extension project in the Peruvian highlands to test the empirical implications of the model. Producers that were not included in the formal market but close to it, performed better in improving agricultural practices. The indirect consequence of this investment is a higher price increase than the rest of the population, creating heterogeneous impacts of the programme, opportunities for economic mobility and a reduction in inequality. The evidence indicates how considering the effects of market structures leads to a more nuanced understanding of the process of agricultural innovation adoption in low and middle income countries.     

Opportunity Cost Pass‐Through from Fossil Fuel Market Prices to Procurement Costs of the U.S. Power Producers

This paper investigates the transmission of fossil fuel commodity spot market price changes to procurement costs of U.S. power producers. We measure and compare the speed and magnitude with which spot prices predict procurement costs using restricted access fuel price data. Natural gas spot prices are quickly reflected in procurement costs. Coal spot prices offer very little predictive power to coal procurement costs. Although not causal, the empirical results also show differences across regulatory status. These findings may have implications for the electricity market deregulation literature that creates marginal cost curves as a competitive benchmark.     

The Economic Impact of Wireless Number Portability

This paper examines the price response of wireless carriers to the introduction of number portability in the U.S. I find that wireless prices decreased in response to number portability, but not uniformly across plans. Average prices for the plans with the fewest minutes decreased by only $0.19/month (0.97%), but average prices for medium and high‐volume plans decreased by $3.64/month (4.84%) and $10.29/month (6.81%), respectively. The results suggest that higher‐volume users in the wireless market benefited more from the policy‐induced reduction in switching costs.     

Discount Brokerage in Residential Real Estate Markets

Transaction costs are thought to affect asset prices and market liquidity, but the direction and magnitude of these effects continue to be the subject of debate. In the single‐family residential market, discount brokers offer to list a house for a lower price and thus reduce the transaction costs associated with obtaining a match. In this article we obtain empirical estimates of the price and liquidity impact of a seller selecting a discount broker to market a single‐family residential property. The unique data set allows for the identification of residential properties that were listed by a discount brokerage firm. The empirical results confirm the predictions of our theoretical model. Using a sample of 318,221 listings and 243,625 sales, we find that houses listed by discount brokers sell at prices similar to non‐discount brokerage listings, but are less likely to sell, and when they do sell, take approximately three days longer to sell. The results indicate that lower transaction costs do not impact housing prices in this market, but that they are related to asset liquidity.     

Barriers to Entry and Competitive Behavior: Evidence from Reforms of Cable Franchising Regulations

Between 2005 and 2008, nineteen of the fifty states of the U.S. reformed the franchising process for cable television, significantly easing entry into local markets. Using a difference‐in‐differences approach that exploits the staggered introduction of reforms, we find that prices for ‘Basic’ service declined systematically by about 5.5 to 6.8 per cent following the reforms, but we find no statistically significant effect on average price for the more popular ‘Expanded Basic’ service. We also find that the reforms led to increased actual entry in reformed states, by about 11.6% relative to non‐reformed states. Our analysis shows that the decline in price for ‘Basic’ service holds for markets that did not experience actual entry, consistent with limit pricing by incumbents. To control for potential state‐level shocks correlated with the reforms, we undertake a sample‐split test that finds larger declines in prices for both ‘Basic’ and ‘Expanded Basic’ services in local markets which faced a greater threat of entry (because they were close to a prominent second entrant). Our results are consistent with limit pricing models that predict incumbents respond to increased threat of entry, and suggest that the reforms facilitated entry and modestly benefited consumers in reformed states.     

Regulation of international roaming in the European Union—Lessons learned

This paper analyzes the evolution of prices and competition in intra-EU international roaming markets. It addresses three main research questions: (i) to what extent have market forces by themselves brought competition to retail roaming markets? (ii) Has the evolution of market dynamics in wholesale roaming improved competition? (iii) Is wholesale regulation sufficient to lead to a reduction in retail roaming prices? Data show that there has been little price-based competition both at wholesale and retail levels, despite prices being well above costs and the significant margins allowed by regulation. Available data from the period preceding the entry into force of the first EU roaming regulation also point to the same conclusion. Lack of competitive pressure in retail roaming markets and inelastic demand give little incentives for retail roaming service providers to lower prices. Wholesale international roaming markets have complex competition dynamics. They are characterized by the reciprocity of wholesale roaming agreements and traffic internalization inside transnational groups. These circumstances limit price competition at the wholesale level. The traditional regulatory approach applied to electronic communication markets has been primarily focused on wholesale regulation. However, empirical evidence shows that even if wholesale charges are reduced, retail roaming markets continue to operate at very high retail margins (for example, more than 200% retail mark-up over wholesale charges for data roaming services and incoming calls). This proves that in international roaming markets wholesale charge reductions are not necessarily passed on to retail prices. It can thus be inferred that wholesale price regulation alone is in most cases not sufficient to ensure that benefits are passed through to end users.