Shopping hours and price competition

This paper develops an argument why retail prices may rise in response to the deregulation of opening hours. We make this point in a model of imperfect duopolistic competition. In a deregulated market retailers view the choice of opening hours as a means to increase the degree of perceived product differentiation thus relaxing price competition. If the consumers’ preference intensity for time is sufficiently high the equilibrium configuration has asymmetric shopping hours where one retailer stays open for longer than the other. Both retailers charge higher prices than under regulation, and both are strictly better off.     

Imports and the structure of retail markets

Abstract We construct a model of trade with heterogeneous retailers to examine the effects of trade liberalization on retail market structure, imports and social welfare. We are especially interested in investigating the transmission of lower import prices into consumer prices and the effects of retail market regulation. The paper shows that changes in import prices may have large effects on consumer prices and import volumes when changes in retail market structure are taken into account, and that restrictions on retailing, as they occur in several countries, may significantly alter this transmission mechanism by reducing imports and raising consumer prices.     

GROWTH, R&D AND WELFARE: THE ROLE OF PUBLIC POLICY

This paper analyzes the normative side of an R&D growth model in which market structure and growth are jointly determined in the equilibrium of a one‐sector economy under monopolistic competition. We find that a distortion in the allocation of R&D, namely the presence of technological spillovers between firms, generates two market failures: insufficient growth and excessive entry of firms. We show that this result is driven by the interplay between market structure and growth. A simple tax/subsidy scheme to support the efficient solution is proposed.     

Vertical distribution, parallel trade, and price divergence in integrated markets

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These tradeoffs imply the counterintuitive result that retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think that permitting PI is an unambiguous force for price integration.     

Municipal aggregation and retail competition in the Ohio energy sector

Ohio allows communities to vote to aggregate the loads of individual consumers (unless they opt out) in order to seek a competitive energy supplier. Over 200 communities have voted to do this for electricity. By 2004 residential switching reached 69% in Cleveland territory (95% from municipal aggregation) but by 2006 had fallen to 8%. Savings are now small, but customer acquisition costs are low and the cost to consumers is negligible. Aggregation and retail competition have been thwarted by Rate Stabilization Plans holding incumbent utility prices below cost since 2006. In the Ohio gas sector, rate regulation has not discouraged aggregation and competition, but market prices falling below municipally negotiated rates can be politically embarrassing. Municipal aggregation thus works when conditions allow it, and enhances competition. How it would fare against individual choice in a market conducive to retail competition remains an open question.      

The determinants of retail petrol prices in Greece

The purpose of this article is to examine the relationship between retail prices of petrol, international oil prices and tax rates in Greece. We examine not only the hypothesis that retail prices act asymmetrically to crude oil price changes and the pass-through rates of tax increases, but also use the cross-sectional dimension of the data to explore whether the existence or otherwise of market power affects retail prices. Our results provide little evidence for asymmetric behaviour. However, the degree to which prices overreact to tax changes and the significance of market power across the different regions suggests that the market for petrol/diesel is not very competitive.     

Deregulation of Shopping Hours: The Impact on Independent Retailers and Chain Stores

This paper studies shopping hour decisions by retail chains and independent competitors. We use a Salop‐type model in which retailers compete in prices and shopping hours. Our results depend significantly on efficiency differences between the retail chain and the independent retailer. If the efficiency difference is small, the independent retailer may choose longer shopping hours than the retail chain and may therefore gain from deregulation at the expense of the retail chain. The opposite result emerges when the efficiency difference is large. Then, the retail chain may benefit whereas the independent retailer loses from deregulation.     

Productivity in a Distorted Market: The Case of Brazil's Retail Sector

In a model of monopolistic competition with heterogeneous firms, distortions in prices drive a wedge between the marginal revenue products of factor inputs across firms. We use census data for Brazil's retail sector to study implications for aggregate productivity and relate distortions to regional variation in regulation using a differences‐in‐differences approach. Taxes, entry regulation, and access to credit may create distortions to output and capital that varies by firm size. Potential gains from reallocation have not diminished despite the process of services liberalization in the 1990s.     

Rockets and feathers meet markup margins: Applications to the oil and gasoline industry

This article investigates the existence of asymmetric price transmission between crude oil, rack (wholesale) and retail gasoline prices. A threshold cointegration technique is used, with regime switches being triggered by the size of the markup margin. There is consistent evidence of band‐TAR in which the crude, rack and retail prices are free to diverge until the markup margin is squeezed or stretched beyond a lower or upper critical threshold. This finding indicates that abnormally high markup margins cannot be sustained, which provides evidence against market power exertion. The threshold error correction models indicate that there is no systematic relationship between the speed of adjustment back to the long‐run relationship and the markup margin, which rules out the existence of “rockets and feathers.”     

加入WTO对我国零售业市场集中度的影响分析及建议

应用绝对集中度的扩展模型对我国零售业在考虑对外开放因素前后的市场集中度进行了对比分析指出,在短期内,受对外开放的影响,零售业市场集中度将下降;但长期来看,规模经济性、企业兼并及技术进步等因素将推动零售业市场集中度呈现不断上升的趋势。我国应加强对零售业的政府管制,以实现有效竞争的市场目标。     

Input Prices as Signals of Costs to a Downstream Rival and Customer

We consider a dual distribution channel in which a vertically integrated manufacturer competes with a downstream rival in a retail market and also sells an input to the rival. We use a signalling model with a continuum of types to examine a situation in which the manufacturer has private information on the production cost of its retail product. We show that in a separating equilibrium under Cournot (Bertrand) retail competition, the manufacturer signals the uncompetitiveness (competitiveness) of its firm by charging a smaller input price than the optimal price under complete information.     

Time as a strategic variable: business hours in the gasoline market

A popular argument in policy discussions on the liberalization of business hours proceeds on the assumption that business hours are strategic complements: if some firms open longer hours, competitors will be forced to extend their opening hours too. We provide first empirical evidence on the impact of competition and the form of strategic interaction in business hours between firms by using detailed information on business hours as well as the location of retail gasoline stations in Austria. Our findings reject the presumption of business hours being strategic complements. Firms tend to have longer opening hours in a more competitive environment.     

Downstream merger with upstream market power

We examine how a downstream merger affects input prices and, in turn, the profitability of a such a merger under Cournot competition with differentiated products. Input suppliers can be interpreted as ordinary upstream firms, or trade unions organising workers. If the input suppliers are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous input prices. In contrast to the received literature, we find that it can be more profitable to take part in a merger than being an outsider. For firm-specific input suppliers, on the other hand, results are reversed. We apply our model to endogenous merger formation in an international oligopoly, and show that the equilibrium market structure is likely to be characterised by cross-border merger.     

Price Adjustments by a Gasoline Retail Chain

We use daily data to examine price responses in the Swedish gasoline market to changes in the Rotterdam spot price, exchange rates and taxes. The distribution of price adjustments by a leading retail chain, for the period January 1980 to December 1996, is symmetric with no small adjustments. An error correction model shows that, in the short run, prices gradually move towards the long-run equilibrium in response to cost shocks. There is some evidence that, also in the short run, prices are stickier downwards than upwards. Prices respond more rapidly to exchange rate movements than to the spot market price. Our analysis emphasizes that to fully understand price adjustments it is necessary to examine data sets where the sample frequency at least matches that of price adjustments.
JEL classification: C 22; E 31; F 14; L 71     

Productivity Growth And Market Structure In Telecommunications

This study examines sources of telecommunications sector productivity growth. Total factor productivity (TFP) growth is calculated using the Malmquist productivity index for a sample of 74 countries for the period 1991 through 1995. An econometric model is estimated which relates TFP growth to output growth, network digitisation, telecommunications development, output-mix, the business cycle and market structure. Model estimates suggest that higher digitisation rates dampen TFP growth in the short run, and cross-subsidisation of services creates inefficiency. However, developing countries can increase TFP growth through catch up, and increased privatisation and competition are conducive to productivity growth.     

Inter-linkages between competition and stabilisation policies in the banking sector and stock market development in Europe

The banking sector and the stock market in Europe have been adversely impacted by a series of global financial crises over the last two decades. Major financial reforms were implemented to enhance the stability and competition within the banking sector. Measures were also implemented to create a vibrant stock market in Europe to stimulate economic growth in Europe. This study examines the interactions between stock market development, banking competition, and banking stability in European countries from 1996 to 2016. The purpose of the study is to understand the inter-linkages between these variables to ascertain the spillover impact of policy reforms in the banking sector on the stock market and vice-versa. Using a vector error-correction model, the study finds long-run and short-run inter-linkages between banking competition, banking stability, and stock market development in European countries. The study’s most robust result is that banking competition and banking stability stimulate stock market development in the long run. There is also some evidence that healthy competition in the banking sector and stock market development instils greater stability in the banking sector. The results suggest that policy measures put in place to create a vibrant stock market must include elevating banking competition and banking stability, with policymakers being cognizant that causality may be bidirectional.     

Oil explains all: desirable organisation of the Russian fuel markets (on the data of three waves of antitrust cases against oil companies)

This article considers the mutual influence of antitrust enforcement in the petroleum product markets and competition legislation in Russia. An analysis of infringement decisions by the Russian competition authority allows us to understand the perceived goals of economic policy in this sector. The shift from antitrust investigations and infringement decisions to a very specific set of remedies is explained by the desire to maintain low retail prices under increasing concentration without price subsidisation or promotion of entry at the refining stage of the value chain. The article highlights the specific use of antitrust legislation to maintain low fuel prices and support independent retailing companies. We also note the limitation this policy faces. The goals and effects of antitrust enforcement in the industry explain, in turn, the specific path of competition legislation development in Russia.     

On the Effects of Suggested Prices in Gasoline Markets

There is a widespread suspicion that suggested prices act as a focal point for individual firms when setting their prices. Oil companies announce suggested prices for gasoline stations in the Dutch retail market. We show that, compared to the gasoline spot market price, suggested prices contain additional information that explains retail price changes. We conclude that suggested prices have a horizontal coordinating effect in the sense that retail prices react to information that suggested prices contain and that is unrelated to firms’ costs (i.e., the information that firms use under normal competitive conditions).     

Pricing Access to a Monopoly Input

What price should downstream entrants pay a vertically integrated incumbent monopoly for use of its assets? Courts, legislators, and regulators have at times mandated that incumbent monopolies lease assets required for the production of a retail service to entrants in efforts to increase the competitiveness of retail markets. This paper compares two rules for pricing such monopoly inputs: marginal cost pricing (MCP) and generalized efficient component pricing rule (GECPR). The GECPR is not a fixed price, but is a rule that determines the input price to be paid by the entrant from the entrant's retail price. Comparing the retail market equilibrium under MCP and GECPR, the GECPR leads to lower equilibrium retail prices. If the incumbent is less efficient than the entrant, the GECPR also leads to lower production costs than does the MCP rule. If the incumbent is more efficient than the entrant, however, conditions may exist in which MCP leads to lower production costs than does the GECPR. The analysis is carried out assuming either Bertrand competition, quantity competition, or monopolistic competition between the incumbent and entrant in the downstream market.     

MULTIPLIER EFFECTS OF PUBLIC SERVICES IN A TWO‐SECTOR MODEL OF MONOPOLISTIC COMPETITION

In a two‐sector model of monopolistic competition, this paper explores what impacts an expansion of government spending on public services has on national income. In the short run where entry and exit of firms are restricted, a rise in government spending on services like health care (which has only a role of substituting for market services) increases national income, but that on services like elderly care (which has not only this role but also another role of contributing to home production of services) decreases it. These results are reversed in the long run. Welfare effects of public services are also examined.