nep-ind New Economics Papers
on Industrial Organization
Issue of 2008‒01‒19
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Price Discrimination Bans on Dominant Firms By Bouckaert, J.M.C.; Degryse, H.A.; Dijk, T. van
  2. The Impact of Market Structure, Contestability and Institutional Environment on Banking Competition By Jacob A. Bikker; Laura Spierdijk; Paul Finnie

  1. By: Bouckaert, J.M.C.; Degryse, H.A.; Dijk, T. van (Tilburg University, Center for Economic Research)
    Abstract: Competition authorities and regulatory agencies sometimes impose pricing restrictions on firms with substantial market power ? the ?dominant? firms. We analyze the welfare effects of a ban on behaviour-based price discrimination in a two-period setting where the market displays a competitive and a sheltered segment. A ban on ?higher-prices-to-shelteredconsumers? decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rival?s profits, and may harm the dominant firm?s profits. We show that a ban on ?higher-prices-to-sheltered-consumers? increases the dominant firm?s share of the first-period market. A ban on ?lower-prices-to-rival?s-customers? decreases prices in the competitive segment, lowers the rival?s profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on ?lower-prices-to-rival?scustomers?, first-period competition is intensified substantially, which leads to lower prices ?on-average? over the two periods. Our findings indicate that a dynamic two-period analysis may lead to conclusions opposite to those drawn from a static one-period analysis.
    Keywords: dominant firms;price discrimination;competition policy;regulation.
    JEL: D11
    Date: 2008
    URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:20083&r=ind
  2. By: Jacob A. Bikker; Laura Spierdijk; Paul Finnie
    Abstract: Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been considered the major determinants of competition in the banking sector. However, we find that these variables have no significant impact on market power. Instead, we show that a country's institutional framework is a key factor in explaining banking competition. Extensive regulation, particularly antitrust policies, improves the competitive environment. The foreign investment climate, a proxy of contestability, also plays an important role. The fewer restrictions on foreign investments exist, the more competitive the banking sector becomes. In addition, activity restrictions make large banks less competitive and collusion markups are procyclical. Finally, competition is substantially weaker in countries with a socialist past, such as Central- and Eastern Europe.
    Keywords: banking competition, market structure, concentration, contestability, interindustry competition
    JEL: D4 G21 L11 L13
    Date: 2007–12
    URL: http://d.repec.org/n?u=RePEc:use:tkiwps:0729&r=ind

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