Price competition and the Bertrand model: the paradox of the German mobile discount market

We investigate the degree of price competition among telecommunication firms. Underlying a Bertrand model of price competition, we empirically model pricing behaviour in an oligopoly. We analyse panel data of individual pricing information of mobile phone contracts offered between 2011 and 2017. We provide empirical evidence that price differences as well as reputational effects serve as a signal to buyers and significantly affect market demand. Additionally, we find that brands lead to an increase in demand and thus are able to generate spillover effects even after price increase.     

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。     

How fiscal policy affects housing market dynamics: Evidence from Spain

This paper studies how the announcements of fiscal law changes affect the real estate market, focusing on the case of Spain. An announcement of a future fiscal law change gives the opportunity to buyers to advance or delay purchases to maximize fiscal benefits. In particular, we study announcements and their posterior effects about the mortgage tax laws in 1998, 2010, 2011, and 2013 plus the VAT law in 2012. The paper is based on contextually rich data from 2004 through 2015 for Spain, provided by a real estate agent with a strong presence across the Spanish territory. We use two dependent variables to best capture the changes: time on market of a dwelling and the price discount of the dwelling. Simultaneity bias is avoided by considering that the degree of overpricing and atypicality affects time on market but not the selling price. The identification strategy is improved by considering the type of properties most affected by the changes versus the rest of properties, using a difference-in-difference estimation. We consider two tax policy announcements: income tax credit on dwelling purchases and VAT rate change on the purchases of new dwellings. In the case of the income tax credit, this fiscal policy affects only primary accommodations. In the case of the VAT tax rate, only new houses are affected. We show that credible fiscal policy announcements distort the housing market by temporarily decreasing dwellings’ time on market and their price discounts, to immediately and long-lastingly increase them just after the tax policy expires. There is a negative causal effect of tax policy announcements on the housing market.     

Impact of government intervention in the housing market: evidence from the housing purchase restriction policy in China

In 2010, a housing purchase restriction policy was announced by China’s central government and implemented gradually by several prefecture governments. In this article, we empirically investigate this policy’s effect on the housing market. Using a difference-in-difference framework, we show that the housing purchase restriction policy reduces housing prices and transaction amounts but does not influence the housing investment or construction markets. Moreover, upstream industry suffers more than downstream industry. The results are robust to a battery of robustness checks. Heterogeneity exists across cities. We find that first- and second-tier cities as well as highly urbanized cities experience great declines in housing prices after the policy’s implementation, especially cites that had high housing prices in 2010 and cities with high real estate investment as a proportion of fixed asset investment. However, the housing policy is less effective in curbing speculative demand.     

How to Turn an Industry Green: Taxes versus Subsidies

Environmental policies frequently target the ratio of dirty to green output within the same industry. To achieve such targets, the green sector may be subsidized or the dirty sector be taxed. We show that in a monopolistic competition setting, the two policy approaches have different welfare effects, depending on the design of the instrument (ad valorem versus unit instrument) and the initial situation (size of the dirty sector). For a strong green policy (a severe reduction of the dirty sector) a tax is the dominant instrument. If initially the dirty sector is important, then for moderate policy targets a subsidy may be the superior tool. These findings have implications for policies such as the Californian Zero Emission Bill.This paper benefited from the comments of Wilhelm Althammer, Michael Kohlhaas, Michael Pflüger, Thomas Ziesemer, participants at the EEA Annual Congress 2003, Stockholm, at the WEAI Annual Conference 2004, Vancouver, and two anonymous referees. The authors are responsible for any remaining errors.     

Privatization in PolandWhat was the government trying to achieve?1

This article uses the sequencing of privatization to infer the objective pursued by the Polish government in the privatization of its large manufacturing firms in the second half of the 1990s. We construct a model of mixed oligopoly and use it to evaluate the privatization process; our analysis is based on the assumption that firms which furthered the government's objective function the most would be chosen to be privatized first. Based on the features of the firms that were chosen for early privatization, our empirical analysis suggests that welfare maximization was more important than the desire to maximize the revenues from privatization and the government's budget or to minimize employment losses.     

A biased firm in a market with complementary products. A note on the welfare effects

We analyse a duopoly setting with complementary products, in which a firm has a bias about its absolute advantage. We show that the bias can internalize parts of the negative externality that the complementarity of goods creates implying a higher producer's surplus. Moreover, we analyse additional conditions, which lead to an increase in the consumer's surplus. Counterintuitively, we show that the presence of a bias can lead to a positive welfare effect.     

政府经济职能:市场机制的补充者

转变政府职能是现阶段经济改革的一项主要任务,关系整个改革进程,因此,我们亟需寻求政府职能的恰当定位。政府经济职能不能定位于市场的替代者,而应定位于市场机制的补充者。把政府经济职能定位于市场机制的补充者是政府职能的真正回归。     

贸易开放、不完全竞争与成本加成——基于中国制造业数据的实证分析

文章利用中国制造行业的面板数据,分析贸易开放对我国国内行业成本加成的影响。回归结果表明,市场竞争与国际贸易是影响我国制造行业成本加成的重要因素。进口贸易在高竞争性行业对成本加成具有正向的促进效应,而在低竞争性行业具有相反的效应;出口贸易对国内行业的成本加成具有显著的正向促进效应。     

Endogenous Timing in a Mixed Oligopoly with Foreign Competitors: the Linear Demand Case

We introduce foreign private firms into the model of Pal (1998) and investigate the impact of the introduction of foreign private firms on the endogenous timing in a mixed oligopoly in the linear demand case. We find that the public firm chooses to be a follower of all domestic private firms and that the public firm chooses not to be a leader of all foreign private firms, which is in contrast to Matsumura (2003).     

R&D subsidies in a duopoly market with outsourcing to the rival firm

This paper investigates the effects of a public uniform R&D subsidy policy in a downstream duopoly market in which a nonintegrated firm, which faces a lower marginal cost, outsources inputs from its vertically integrated rival. The findings show that, in this market structure, such a policy has relevant effects largely differentiated between downstream competitors, as it can significantly modify the relative market shares and profitability of competing firms. Unlike the standard Cournot setting augmented with R&D, results show that the subsidy policy can have different (counterintuitive) effects on R&D investments, output, and profits of the vertically integrated producer and the vertically separated firm, which hold in both cases of exogenous and endogenous (optimal) subsidy. Our findings offer some testable implications and suggest that a subsidy policy in a market with outsourcing to a rival should also consider the different effects of this approach on competitors.     

Vertical price transmission in the Turkish poultry market: the avian influenza crisis

This article assesses the impact of the Avian Influenza (AI) outbreak in the Turkish poultry market by focusing on price transmission at producer and retail levels. The relationship and patterns of transmission between producer and retail prices are analysed by estimating a Regime-Switching Vector Error Correction Model with three regimes. An AI information index variable is developed and used to determine regime-switching. Results suggest that consumer prices adjust to disequilibrium caused by the AI crisis, while producer prices are sticky and slowly responsive.     

Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital

Abstract. Hospital markets are often characterized by price regulation and the existence of different ownership types. Using a Hotelling framework, this paper analyses the effect of heterogeneous objectives of hospitals on quality differentiation, profits and overall welfare in a price‐regulated duopoly with exogenous symmetric locations. In contrast to other studies on mixed duopolies, this paper shows that, in this framework, privatization of the public hospital may increase overall welfare. This holds if the public hospital is similar to the private hospital or less efficient and competition is low. The main driving force is the single‐regulated price which induces under‐provision (over‐provision) of quality of the more (less) efficient hospital compared with the first best. However, if the public hospital is sufficiently more efficient and competition is fierce, a mixed duopoly outperforms both a private and a public duopoly due to an equilibrium price below (above) the price of the private (public) duopoly. This medium price discourages over‐provision of quality of the less efficient hospital and – together with the non‐profit objective – encourages an increase in quality of the more efficient public hospital.     

Price discovery and the effects of fragmentation on market quality: evidence from Cypriot cross-listed stocks

Using a novel high-frequency data set, we examine the contribution of Greek trading to the price discovery process of a pair of Cypriot blue-chip, cross-listed stocks during overlapping trading hours. Additionally, we investigate the effects of market fragmentation on the home market’s quality, as measured by microstructure-based liquidity measures. Contrary to earlier studies from other markets, our findings show that foreign stock exchanges can act as the leading contributors to price discovery and can concentrate the majority of trading activity and produce the lowest transaction costs. Our results also show that market fragmentation can lead to negative effects on market liquidity.     

Asymmetric search and prospect theory: choice experiment on consumer willingness to search in the gasoline retail market

We use an internet survey conducted among a representative random sample of drivers in the State of Ohio consisting of a choice experiment designed to examine the mechanism driving asymmetric search. The internet survey affords us the opportunity to overcome endogeneity difficulties by imposing exogenous price changes on gasoline consumers to examine the decision-making process behind intended search decisions. We randomly assigned participants to one of five price treatments (either 2.5 or 5% above or below their reported expected price, or no change). We provide a simple empirical model to derive testable implications under prospect theory and use the internet survey to test them. Results indicate that among the respondents who faced prices below their expected price, only 12% chose to search, whereas 45% searched when prices were above. Further, we find results consistent with asymmetric search being driven by prospect theory. The change in consumers’ willingness to search is twice as large when prices exceed expectations by 2.5% relative to when prices exceed them by 5% suggesting that consumers derive utility of finding a good deal evaluated relative to a reference price. We show that this result is inconsistent with standard utility theory or consumers using alternative reference prices.     

A Schumpeterian model of investment and innovation with labor market regulation

Theoretical and empirical models provide ambiguous responses on the relationship between labor market regulation, innovation and investment. On the one hand, labor market regulation increases firms' adjustment costs and, ceteris paribus, decreases investment. But, on the other, it also stimulates firms to invest, innovate, increase productivity and profit in the long run. In this paper we present an endogenous growth model that describes the role of these opposite forces, and why a stricter labor market regulation may positively affect innovation and investment in the long run. Most of the theoretical and empirical results hold for Italy, Germany, France, and Spain.     

How store format choices and market structure affect agglomeration economies and competition among chain stores in the US supermarket industry

This article studies how store format choices and market concentration affect agglomeration economies and competition among chain stores. Using data on supermarket chains in Arizona, Georgia and Illinois, we decompose a store’s sales into parts stemming from local market conditions, such as demographics, and parts stemming from competition measures, which can be of its own chain’s stores or of other chains’ stores. Our results show that local market conditions are still a key factor in generating store sales. In more concentrated markets of Georgia and Illinois, a supermarket chain suffers from business-stealing among its own stores – agglomeration economies not sufficient to offset competition among its stores – but ironically tolerates the presence of other chains’ stores. Can a retail chain favourably tip the balance of agglomeration economies and competition? We find the answer by looking at the two big corporations in Arizona – Bashas Markets Inc. and Kroger Co. – which own two and three store formats, respectively, catering to distinct consumer segments, and thus promoting agglomeration economies while minimizing competition among their own stores.     

How to measure the market power of banks in the lending business accurately: a segment-based adjustment of the Lerner Index

Numerous empirical studies use the price-cost-margin-based Lerner Index (LI) to assess the general market power of banks. A common procedure within those LI applications is to approximate the market price required for the LI measurement as the ratio of a bank’s total revenues to total assets. We discuss the major flaws of this aggregated procedure and propose an adjusted (i.e. business segment-orientated) LI approach, which is then applied to assess the market power of banks in the specific lending business at the country level. Our empirical study is based on an original data set containing all interest-related categories (weighted by the respective loan as well as deposit volumes) in the countries of the European Monetary Union zone (EMU) from 2003 to 2013. Our results reveal that the country-specific market power of banks in the lending business has been substantially underestimated in previous studies based on aggregated outputs. For example, averaged across the five most important economies in the EMU, we detect a calibration factor of four. Our findings corroborate the economic notion that the interest-bearing lending business is a more locally separated, and thus profitable, segment in which competition is attenuated.     

Ghana and the international cocoa market, 1956–1969 : A simulation model

This paper investigates the impact of the international cocoa market on Ghana between 1956 and 1969 by constructing and estimating an econometric model and simulating the effects of fluctuations in selected cocoa variables on her export revenue. In particular, it assesses repercussions of changes in the real incomes of major cocoa-consuming countries, of changes in the rest of the world's cocoa output, and of changes in the real price paid to Ghanaian cocoa farmers. Our results emphasize the vulnerability of Ghana to shocks emanating from the international economy, and the importance of dynamic lagged adjustment in the cocoa market.     

A model of local labor market reguiation of Chin in the transition period

With the establishment of labor market of China,market is playing a more and more important role in allocation of human resources.However,with the transition of economy in China and industrial upgrading in recent years,many labor problems have occurred which do harm to the sustainable development of local economy.The paper researches on the labor market issues of China from the perspective of local labor market regulation,Firstly,reviews the theories of local labor market regulation.And then the main components of local labor market regulation of China are identified and the evaluation index system is established,The results of analysis of the calculated output show that (1) the local labor market regulation of China has an obvious character of gradient distribution geographically and decreases gradually from east to west;(2) of all the regulations,the regulation of the development of human capital has the most significant impact on local economy currently which is followed by the regulation of laborrelation and the regulation of market participation.As to the regulation of social security,it has no significant impact on the development of local economy.