nep-com New Economics Papers
on Industrial Competition
Issue of 2016‒01‒29
eight papers chosen by
Russell Pittman
United States Department of Justice

  1. Measuring the Effectiveness of Anti-cartel Interventions: A Conceptual Framework By Yannis Katsoulacos; Evgenia Motchenkova; David Ulph
  2. Antidumping and Market Competition: Implications for Emerging Economies By Chad P. Bown; Rachel McCulloch
  3. Challenges of Indonesian Competition Law and Some Suggestions for Improvement By Manaek SM PASARIBU
  4. Equilibrium Price Dispersion and the Border Effect By Stevens, Luminita; Chahrour, Ryan
  5. Pricing behaviour of cooperatives and investor-owned dairies in a spatial market setting By Zavelberg, Yvonne; Storm, Hugo
  6. Air transport liberalisation and airline network dynamics: Investigating the complex relationships By Frédéric Dobruszkes; Anne Graham
  7. Japan's oligopolies: potential gains from third arrow reforms By Akihito Asano; Rod Tyers
  8. Price-setting Behavior and Competition in Developing Countries: An Analysis of Retail Outlets in Lesotho By Mamello Nchake, Lawrence Edwards and Asha Sundaram

  1. By: Yannis Katsoulacos (Athens University of Economics and Business); Evgenia Motchenkova (VU University Amsterdam); David Ulph (University of St Andrews)
    Abstract: This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalising cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analysed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioural Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions.
    Keywords: Antitrust Enforcement, Antitrust Law, Cartel, Oligopoly, Repeated Games
    JEL: L4 K21 D43 C73
    Date: 2015–12–21
  2. By: Chad P. Bown; Rachel McCulloch
    Abstract: While the original justification of the antidumping laws in the industrial economies was to protect domestic consumers against predation by foreign suppliers, by the early 1990s the laws and their use had evolved so much that the opposite concern arose. Rather than attacking anti-competitive behavior, dumping complaints by domestic firms were being used to facilitate collusion among suppliers and enforce cartel arrangements. This paper examines the predation and anti-competitiveness issues from the perspective of the “new users” of antidumping—the major emerging economies for which antidumping is now a major tool in the trade policy arsenal. We examine these concerns in light of important ways in which the world economy and international trading system have been changing since the early 1990s, including more firms and more countries participating in international trade, but also more extensive links among suppliers and consumers through multinational firm activity and vertical specialization.
    Keywords: antidumping, temporary trade barriers, competition, antitrust, WTO
    JEL: F13
    Date: 2015–10
  3. By: Manaek SM PASARIBU (Commission For The Supervision of Business Competition (KPPU))
    Abstract: This paper discusses the problems in the implementation of Law No. 5 of 1999, the Indonesian Competition Law, explains the substance of the law, and provides recommendations for amending the Indonesian competition law. Existing loopholes in the enforcement of competition law in Indonesia, both in substantive and procedural terms, have created difficulties in practice. One way to solve this problem would be to amend the competition law. Our suggestions for the amendment of the Indonesian Competition Law relate to institutional status, dawn raid authority, indirect evidence, leniency programme, procedural law, private litigations, legal aspects of cross border enforcement, and merger notification. We expect that amending said law will result in a balance between procedural and substantive law and that implementing the competition law will finally create legal certainty regarding competition law enforcement in Indonesia.
    Keywords: competition law, Indonesia, amendment, dawn raid authority, indirect evidence, leniency programme, procedural law, private litigations
    JEL: L40
    Date: 2016–01
  4. By: Stevens, Luminita (Federal Reserve Bank of Minneapolis); Chahrour, Ryan (Boston College)
    Abstract: We develop a model of equilibrium price dispersion via retailer search and show that the degree of market segmentation within and across countries cannot be separately identified by good-level price data alone. We augment a set of well-known empirical facts about the failure of the law of one price with data on aggregate intranational and international trade quantities, and calibrate the model to match price and quantity facts simultaneously. The calibrated model matches the data very well and implies that within-country markets are strongly segmented, while international borders contribute virtually no additional market segmentation.
    Keywords: Law of one price; Border effect; Real exchange rate
    JEL: E30 F30 F41
    Date: 2015–12–18
  5. By: Zavelberg, Yvonne; Storm, Hugo
    Abstract: This study analyses spatial competition in Germany’s raw milk market differentiating between cooperatives and investor-owned firms. We assess the impact of the own legal form and that of neighboring competitors on the pricing behavior. The focus of the empirical analysis is on the relations of space, measured as the average distance to competing neighbours, and raw milk prices. The results allow testing the shape of the relationship between price and space derived theoretically in the literature. For the south of Germany we find a negative relationship between space and raw milk price while for the north the relationship is positive. In both north and south the effect is stronger for cooperative compared to investor-owned firms. Further, we test for the competitive yardstick effect for which we find only small evidence in the south. The estimation is based on a data set covering all German dairies from 2001 to 2012 providing information on raw milk prices, processing quantities, legal and production form.
    Keywords: market power, imperfect competition, spatial competition, cooperatives, investor-owned firms, competitive yardstick, Agricultural and Food Policy,
    Date: 2015
  6. By: Frédéric Dobruszkes; Anne Graham
    Date: 2016
  7. By: Akihito Asano; Rod Tyers
    Abstract: Progress has been made in economic reform under the "Abenomics" first (monetary policy) and second (taxation reform) "arrows". The third, which emphasises structural reforms, has been more politically difficult, thus far yielding mixed results. This paper explores the gains that are possible from the labour market, tax and competition reforms embodied in the third arrow program. Economic rents and industry concentration levels are first identified from Nikkei firm specific data and used to construct an economy-wide model that represents oligopoly behaviour and its regulation explicitly. The analysis finds that modest gains in efficiency are available labour growth and, when it is accompanied by corporate governance reform, the switch between company and consumption taxation. Larger gains are shown to be available from active competition policy and, particularly, from productivity enhancing FDI in services. Central to the results is that a resurgent Japanese economy requires efficiency improvements that raise home rates of return and rebalance its large home and foreign asset portfolio toward home investment and capital growth.
    Keywords: Regulation, oligopoly, services, price caps, privatisation, general equilibrium, industrial reform.
    JEL: C68 D43 D58 F41 F47 L13 L43 L51 L80
    Date: 2016–01
  8. By: Mamello Nchake, Lawrence Edwards and Asha Sundaram
    Abstract: We study the relationship between price-setting behavior and the degree of competition in a setting where markets and information flows are relatively imperfect. Using a unique dataset that combines survey data on retail outlets in Lesotho, and detailed historical information on their product prices, we find a non-monotonic relationship between the frequency of price changes and perceived competition, measured by the number of reported competitors. This non-monotonic relationship is consistent with a model of increasing costs of coordinating price changes under tacit collusion with few competitors, and a breakdown of collusion at higher levels of competition.
    Keywords: price rigidity, Competition, Survey data, Micro price data, Emerging economies
    JEL: E30 D40 D22 L21
    Date: 2015

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