the political economy of trade institutions of protection d omestic support for a liberal commercial policy in the u s rests on a commonly accepted set of rules and norms these rules and norms best characterized as a defense of free and fair trade arise from two different traditions the first originated as a political reaction to high trade barriers preceding the great depression central decision makers took as a lesson from the depression period that short term political forces should not determine the level of state intervention into the market the second to protect against unfair trade emanates from a long history of state support for industries that claim foreign producers are pursuing unfair predatory practices established in statute before the depression these rules did not fundamentally change in the postwar period together these decision rules are used to interpret american trade protectionism

why do suppliers charge larger buyers lower prices the phenomenon of input suppliers charging larger buyer firms relative to smaller buyer firms lower prices is commonly explained in terms of supplier economies of scale supplier competition for larger buyers and the larger bargaining power of larger buyers this paper provides an alternative explanation and shows that the observed direction of differential pricing can benefit the supplier by lowering the level of tacit collusion its buyers can sustain in their output market this result also provides a new mechanism through which a ban on price discrimination by input suppliers may lower consumer welfare

competition and entry in agricultural markets experimental evidence from kenya african agricultural markets are characterized by low farmer revenues and high consumer food prices many have worried that this wedge is partially driven by imperfect competition among intermediaries this paper provides experimental evidence from kenya on intermediary market structure randomized cost shocks and demand subsidies are used to identify a structural model of market competition estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent exogenously induced firm entry has negligible effects on prices and low take up of subsidized entry offers implies large fixed costs we estimate that traders capture 82 percent of total surplus

equilibrium demand elasticities across quality segments abstract empirical studies find substantial differences in demand elasticities and associated markups among products of different quality this paper analyzes the theoretical determinants of such variation we present a simple model that allows for horizontal and vertical differentiation and accounts for endogenous entry we find that most economic forces in our model such as consumers price sensitivity the scope for product differentiation and sunk costs of entry are likely to induce lower equilibrium demand elasticities for higher quality products in contrast other economic forces such as marginal cost of production and the distribution across consumers of the willingness to pay for quality may induce the opposite pattern these results provide an organizing framework through which empirical findings may be interpreted and may also help to predict variation in demand elasticities for markets in which empirical estimates of elasticities are unavailable or infeasible to obtain

large market asymptotics for differentiated product demand estimators with economic models of supply io economists often estimate demand for differentiated products using data sets with a small number of large markets by modeling demand as depending on a small number of product characteristics one might hope to obtain increasingly precise estimates of demand parameters as the number of products in a single market grows large in this paper i address the question of consistency and asymptotic distributions of iv estimates of demand in a small number of markets as the number of products increases in some commonly used demand models under conditions on economic primitives i show that under the common assumption of a bertrand nash equilibrium in prices product characteristics lose their identifying power as price instruments in the limit in many of these models giving inconsistent estimates in these cases i find that consistent estimates can still be obtained for many of the cases i consider but care must be taken in modeling demand and choosing instruments for cases where consistent estimates can be obtained i provide sufficient conditions for consistency and asymptotic normality of estimates of parameters and counterfactual outcomes a monte carlo study confirms that the asymptotic results provide an accurate description

commitment and monopoly pricing in durable goods models this article investigates the issue of commitment by a durable goods monopolist two models of the interaction between durability recycling and market power are compared the two differ according to the ability f the seller to credibly commit to a given salec qtrn egy this article takes the standard durable goods monopoly model extends it to allow for depreciation and compares the monopoly markup with swan s predicted markup for a recycled good the difference between the two models is shown to reduce to a single parameter in the markup equation

pricing and financial resources an analysis of the disk drive industry 1980 88 this paper empirically examines the long purse hypothesis formalized by patrick bolton and david scharfstein 1990 that incumbents may drive out entrants through aggressive pricing the author analyzes the pricing of 733 disk drives between 1980 and 1988 drives that are adjacent to those manufactured by thinly capitalized undiversified rivals are priced lower than other drives during the later years in the sample when little equity financing was available to these firms the results are robust to controls for alternative hypotheses and to other specifications of the hedonic regression copyright 1995 by mit press

valuing product innovation genetically engineered varieties in us corn and soybeans we develop a discrete choice model of differentiated products for us corn and soybean seed demand to study the welfare impact of genetically engineered ge crop varieties using a unique data set spanning the period 1996 2011 we find that the welfare impact of the ge innovation is significant in the last five years of the period analyzed our preferred counterfactual indicates that total surplus due to ge traits was 5 18 billion per year with seed manufacturers appropriating 56 of this surplus the seed industry obtained more surplus from ge corn whereas farmers received more surplus from ge soybeans

competition in durable goods markets the strategic consequences of leasing and selling in marketing durable goods manufacturers use varying degrees of leasing and selling to consumers e g cars photo copiers personal computers airplanes etc the question that this raises is whether the distinction between leases and sales is simply one of price or whether the proportion of leases and sales effects a firm s ability to compete in the market in this paper we use two approaches to argue that leasing and selling create strategic consequences that extend beyond prices first we develop a stylized theoretical model that shows that the optimal proportion of leases and sales depends on the competitiveness of the market and on the inherent reliability of the firm s product and second we find support for the implications of our theoretical model with data from the automobile industry the u s automobile industry has seen a large increase in leasing over the last five years however the extent to which leasing has been embraced varies widely across manufacturers for example in 1993 the sport utility segment had the following lease percentages ford explorer 29 jeep grand cherokee 24 toyota 4 runner 11 and chevrolet blazer 9 in addition manufacturers often vary lease percentages across models for example in 1993 ford leased 22 of its crown victoria model 35 of its taurus model and 42 of its probe model a popular argument for why we see these differences is that higher priced cars are leased more often because leasing makes them more affordable however this rationale is not compelling in the face of our data for example the ford probe was priced significantly lower than the crown victoria and yet it was leased almost twice as often to develop a better understanding of why we observe differences in the proportion of leasing we develop a two period model of a duopoly in which each manufacturer chooses its optimal quantity and the fraction of units it wants to lease we find that in equilibrium neither firm leases all its units either they use a mix of leasing and selling or they use only selling our analysis suggests that the fraction of leased cars decreases as the manufacturers products become more similar and the competition between them increases the intuition for this result is that a higher fraction of leases puts the firm at a competitive disadvantage in the future this occurs because unlike firms that sell their product firms that lease are at a price disadvantage another important finding in this paper is that the extent of leasing chosen by a manufacturer depends on the reliability of its product in particular all else being equal the lower a product s reliability the lower its proportion of leases within the context of the automobile industry this suggests that more expensive cars may be leased more often because they are of higher quality and not necessarily because they are more expensive finally we test the implications of our theoretical model with data from the u s automobile market in particular for 1993 model year cars we develop a measure of reliability using data from consumer reports in addition we develop a measure of the extent of competition in each segment of the automobile market we support our hypotheses by finding that the extent to which a car model is leased depends strongly on its predicted reliability and on the competitive intensity within the segment

competitive pricing behavior in the auto market a structural analysis in a competitive marketplace the effectiveness of any element of the marketing mix is determined not only by its absolute value but also by its relative value with respect to the competition for example the effectiveness of a price cut in increasing demand is critically related to competitors reaction to the price change managers therefore need to know the nature of competitive interactions among firms in this paper we take a theory driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the u s auto market the ability motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy boulding and staelin 1995 we use arguments from the game theoretic literature to understand firm motivation and abilities in different segments of the auto market we then combine these insights from the game theoretic literature and the ability motivation paradigm to develop hypotheses about competition in different segments of the u s auto market to test our hypotheses of competitive behavior we estimate a structural model that disentangles the competition effect from the demand and cost effects on prices the theory of repeated games predicts that firms with a long run profitability objective will try to sustain cooperative pricing behavior as a stable equilibrium when conditions permit for example markets with high concentration and stable market environments are favorable for sustaining cooperative behavior and therefore provide firms with the ability to cooperate the theory of switching costs suggests that in markets in which a firm s current customers tend to be loyal firms have a motivation to compete very aggressively for new customers recognizing the positive benefits of loyalty from the customer base in the long run as consumer loyalty in the market increases the gains from increasing market share by means of aggressive competitive behavior are more than offset by losses in profit margins firms therefore have the motivation to price cooperatively empirically we find aggressive behavior in the minicom pact and subcompact segments cooperative behavior in the compact and midsize segments and bertrand behavior in the full size segment these findings are consistent with our theory based hypotheses about competition in different segments in estimating a structural model of the auto market we address several methodological issues a particular difficulty is the large number of car models in the u s auto market existing studies have inferred competitive behavior only in markets with two to four products they also use relatively simple functional forms of demand to facilitate easy estimation functional forms of demand however impose structure on cross elasticities between products such structure when inappropriate can bias the estimates of competitive interaction we therefore use the random coefficients logit demand model to allow flexibility in cross elasticities we also use recent advances in new empirical industrial organization neio to extend structural estimation of competitive behavior to markets with a large number of products we use the simulation based estimation approach developed by berry et al 1995 to estimate our model a frequent criticism of the neio approach is that its focus on industry specific studies limits the generalizability of its findings in this study we retain the advantages of neio methods but partially address the issue of generalizability by analyzing competitive behavior in multiple segments within the auto industry to see whether there is a consistent pattern that can be explained by theory theoretical modelers can use our results to judge the appropriateness of their models in predicting competitive outcomes for the markets that they analyze a by product of our analysis is that we also get estimates of demand and cost apart from competitive interactions for the market managers can use these estimates to perform what if analysis they can answer questions about what prices to charge when a new product is introduced or when an existing product s characteristics are changed

empirical analysis of competitive product line pricing decisions lead follow or move together researchers have recently developed models for determining which market conduct best describes observed data we apply these techniques from the new empirical industrial organization literature to the competitive product line pricing decision where a firm strategically prices its brands when determining the profit maximizing conduct in the market demand cost and market structure are estimated endogenously empirical results from analyzing price competition in the laundry detergent market between procter and gamble selling tide and eraplus and lever brothers offering wisk and surf indicate that each firm positions its strong brand as a stackelberg leader with the rival s minor brand being the follower

hegemonic stability theory and 19th century tariff levels in europe although the theory of hegemonic stability has attracted an impressive array of adherents current formulations leave many conceptual issues unresolved existing formulations also fail to draw from the theory any implications concerning the process by which a hegemonic state creates and maintains a regime as an example great britain is generally agreed to have been hegemonic in the nineteenth century but britain s behavior was generally inconsistent with that implied by a theory of hegemonic stability i advance an alternative set of explanations for changes in international tariff levels based on the notion of a political business cycle

resale and collusion in a dynamic market for semidurable goods the paper studies the incentives to form collusive agreements when goods can be traded in second hand markets it will be shown that such incentives crucially depend on the rate of depreciation of the durable good and on consumer heterogeneity the main contribution of the paper shows that an active second hand market may strengthen the incentives to collude as do policies that affect the functioning of the second hand market e g leasing policy and buy back it will also be argued that the oligopoly incentives to adopt strategies that strengthen collusion often differ from the monopoly incentives to increase profits

measuring oligopsony power with shadow prices u s markets for pulpwood and sawlogs empirical estimation of input market power hindered by problems in measuring an input s value of marginal product vmp by estimating a variable profit function system however one can infer a factor s vmp through its shadow price this technique is used here to specify a structural equation system which is estimated using time series data for the u s sawmilling and paper industries to empirically measure the degree of oligopsony power for sawlog and pulpwood inputs respectively results evaluated at sample means indicate that pulpwood markets are more oligopsonistic than sawlog markets though both perform closer to perfect competition than monopsony time trends for market power differ for each product and perfect competition cannot be rejected for sawlogs in later years copyright 1995 by mit press

integrating western and eastern european markets changing trade preferences in traditional manufacturing sectors in the european union although general trade theories are useful for specifying which groups support or oppose trade these frameworks see preferences as static and do not explain how they change over time instead this article proposes a dynamic perspective that considers how economic adjustment and liberal trade policies alter trade preferences the article examines why the traditionally protectionist german textile and apparel sectors accept the recent trade agreements with eastern europe producers can exploit technological and product changes by gaining access to export markets furthermore to take advantage of low labor costs abroad producers shift production to these countries for later reimportation lower trade barriers are therefore attractive to producers this strategy is also supported by increasingly liberal trade policy orientations in germany the european union eu and the general agreement on tariffs and trade gatt german producers have therefore modified their protectionist focus to a qualified suppo

the effect of local competition on admission prices in the u s motion picture exhibition market abstract this paper provides empirical evidence on the relationship between local market structure and the prices charged to consumers in the u s motion picture exhibition market i find that there is a statistically significant relationship between the geographic distribution of movie theaters in a market and the admission prices that they are able to charge however the magnitude of the price reducing effect of local competition appears to be economically modest moreover i find no evidence that increases in geographic concentration lead to increased adult admission prices the findings are directly relevant to merger policy in the industry and pertinent because of the dramatic changes in industry structure resulting from mergers that occurred during 2002 i conclude that the available evidence suggests that popular and governmental concerns about horizontal mergers in the industry leading to dramatically increased admission prices are likely misplaced

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

the demand for international regimes international regimes can be understood as results of rational behavior by the actors principally states that create them regimes are demanded in part because they facilitate the making of agreements by providing information and reducing transactions costs in world politics increased interdependence among issues greater issue density will lead to increased demand for regimes insofar as regimes succeed in providing high quality information through such processes as the construction of generally accepted norms or the development of transgovernmental relations they create demand for their own continuance even if the structural conditions such as hegemony under which they were first supplied change analysis of the demand for international regimes thus helps us to understand lags between structural change and regime change as well as to assess the significance of transgovernmental policy networks several assertions of structural theory seem problematic in light of this analysis hegemony may not be a necessary condition for stable international regimes past patterns of institutionalized cooperation may be able to compensate to some extent for increasing fragmentation of power

integrated models of capital adequacy why banks are undercapitalised with the majority of large uk and many us banks collapsing or being forced to raise capital over the 2007 9 period blaming bankers may be satisfying but is patently insucient basel ii and federal oversight frameworks also deserve criticism we propose that the current methodological void at the heart of basel ii pillar 2 is filled with the recommendation that banks develop fully integrated models for economic capital that relate asset values to fundamental drivers of risk in the economy to capture systematic eects and inter asset dependencies in a way that crude correlation assumptions do not we implement a fully integrated risk analysis based on the balance sheet of a representative eurobank using an economic scenario generation model calibrated to conditions at the end of 2007 our results suggest that the more modular correlation based approaches to economic capital that currently dominate practice will have led to an undercapitalisation of banks a

automobiles in international trade regime change or persistence the concept of a regime is frequently used to describe and explain behavior in international political economy peter cowhey and edward long attempting to test theories of surplus capacity and hegemonic decline advanced a version of a regime governing international trade in automobiles which was fundamentally liberal from 1966 to 1975 but then collapsed into protectionism their diagnosis is mistaken however because the trade regime for autos was neither as liberal as they assert during the 1950s and 1960s nor as protectionist as they believe it has become in the 1980s the discussion focuses on a new definition of the auto trade regime based on four fundamental rules that have persisted since the 1950s by examining data on auto imports since 1955 on a region by region basis it becomes clear that the trade expansion of the postwar years was not based on a global liberalization of the trade regime but on carefully managed regional arrangements that favored imports within the region or extra regional imports that did not threaten domestic producers the flurry of restraints on japanese imports in recent years is not a collapse into protectionism but a reinforcement of the fundamental regime rules the auto industry case illustrates the tendency of analysts to underestimate protectionist elements in industry trade regimes and to overestimate the amount of changes that take place in their fundamental rules

retail price fixity as a facilitating mechanism previous theoretical explanations for retail price fixity show that fixed retail prices can be consistent with either competitive or imperfectly competitive behavior we develop a conceptual model of retail pricing wherein fixed price points are facilitating mechanisms for tacit collusion a non cooperative equilibrium in fixed retail prices is supported through credible threats to revert to nash pricing if cheating is suspected we test the implications of this model using a two stage ordered probit approach in weekly supermarket pricing data the results show that price fixity does support collusive equilibria among retailers but other factors may also explain retail price behavior

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

the unraveling of the multi fiber arrangement 1981 an examination of international regime change as competition between newly industrializing and advanced industrialized countries has increased trade protection has become a key issue in textile and apparel trade international regimes to regulate trade intervention have existed since the early 1960s the 1981 renewal of the multi fiber arrangement poses two puzzles first why did countries choose to continue to manage conflict through an international regime rather than through some other arrangement second why did the regime become weaker and more protectionist than in the past an international structure approach suggests that regimes are wanted to prevent arrangements in larger systems from being undermined to control the behavior of other countries and to reduce information costs variation in regime strength can be explained by asymmetry in the distribution of capabilities in various systems the nature of the regime is influenced by changes in international competition and by nesting a domestic structure approach on the other hand focuses on the relationships between state and societal groups the commission and member states in the case of the eec the relative strength of groups affects national policies and the development and characteristics of regimes a processtracing examination of international textile negotiations emphasizing the response of decision makers to structural constraints and incentives allows us to ascertain the relative influence of international and domestic structures on the negotiations and outcomes

price discrimination in the context of vertical differentiation an application to canadian wheat exports this study examines the ability of the canadian wheat board cwb to price discriminate in bread wheat exports this study models wheat as a vertically differentiated intermediate good and modifies the model of vertical differentiation by mussa and rosen to the realities of wheat import demand the conceptual model isolates the bases of price discrimination and demonstrates that the cwb s ability to exploit cost differences in pricing depends on the extent of the differentiation between canadian and u s wheat this model is implemented using monthly confidential price data provided by the cwb for exports to japan the united kingdom and two markets aggregating remaining exports through canada s west and east coasts for 1982 1994 the data indicate that the cwb charges different prices to different countries for wheat of the same grade and protein content results from the model indicate that the price difference between any two markets is not completely explained by elements of perfect competition however the evidence is mixed regarding the ability of the cwb to utilize all the instruments available to price discriminate thus the cwb s pricing strategy may be more complex and dynamic than the prescription for static producer surplus maximization derived in this study

the transformation of trade the sources and effects of regime change regimes can be analyzed both as outcomes to be explained and as mediating social institutions that affect international transactions in the case of postwar trade the changing outcomes can be predicted simply and with rough accuracy by a hegemonic model yet that model cannot explain the continuing reduction of tariffs the development of new nontariff codes and the persistence of crucial norms rules and institutions these durable features of modern trade suggest that the logic of regime maintenance is distinct from that of regime initiation nor can the hegemonic model account for the regime s highly uneven weakening the most prominent trade barriers are in mature basic industries the least prominent are in industries with differentiated products and extensive research and development expenditures one explanation which usefully complements a hegemonic model is that sectors differ systematically in their capacity to adapt competitively to imports and hence in their need to preserve their position by trade barriers despite the regime s uneven weakening trade volumes have continued their secular growth in sectors where the regime remains strong it has stimulated two way trade in similar products intraindustry trade where the regime is weaker new nontariff barriers diminish hypothetical trade growth but rarely aim at a permanent rollback in market shares or trade volume

tiered co payments pricing and demand in reference price markets for pharmaceuticals health insurance companies curb price insensitive behavior and the moral hazard of insureds by means of cost sharing such as tiered co payments or reference pricing in drug markets this paper evaluates the effect of price limits below which drugs are exempt from co payments on prices and on demand first using a difference in differences estimation strategy we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand name drugs in the german reference price market second estimating a nested logit demand model we show that consumers appreciate co payment exempt drugs and calculate lower price elasticities for brand name drugs than for generics this explains the different price responses of brand name and generic drugs and shows that price related co payment tiers are an effective tool to steer demand to low priced drugs

quantifying the coordinated effects of partial horizontal acquisitions abstract recent years have witnessed an increased interest by competition agencies in assessing the competitive effects of partial acquisitions we propose an empirical structural methodology which can deal with settings involving all types of owners and ownership rights to quantify the coordinated effects of partial horizontal acquisitions on differentiated products industries by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained we also provide an empirical application of the methodology to several acquisitions in the wet shaving industry that give rise to cross and common ownership structures the results are as follows i the incentives to coordinate of the firms that the acquiring party is pre acquisition able to influence are non decreasing with any acquisition ii the incentives to coordinate of the acquired firm are non decreasing with acquisitions involving full or partial both financial and corporate control rights but non increasing with acquisitions involving full or partial solely financial rights and iii the incentives to coordinate of the remaining firms in the industry are non increasing with any acquisition this implies that the coordinated effects of partial horizontal acquisitions are in general ambiguous which illustrates the importance of an empirical structural methodology

consumer and competitor reactions evidence from a field experiment abstract in response to a price change by a single seller it is common for the density of sellers in the market to influence both the quantity response of consumers and the price response of other sellers using field experiment data collected around a series of exogenously imposed price changes we find that an individual retailer with a larger number of competitors faces a more responsive demand this finding is fundamental to a predicted inverse relationship between market prices and the number of competitors we also examine the reaction of rival stations to exogenous price changes and find that the magnitude of a competitor s response is inversely related to the density of stations in the market

competition and collusion in the american automobile industry the 1955 price war movements in total quantity and in quality adjusted price suggest a supply side shock in the american automobile market in 1955 this paper tests the hypothesis that the shock was a transitory change in industry conduct a price war the key ingredients of the test are alternative equilibrium models of oligopoly under product differentiation in nonnested cox tests of hypotheses a collusive solution is sustained in 1954 and in 1956 while a competitive solution holds in 1955 the result does not appear to be an artifact since it is robust in tests against alternative specifications copyright 1987 by blackwell publishing ltd

measuring consumerwelfareinthe cpu market anapplication of the pure characteristics demand model in this article i estimate demand for the personal computer central processing unit and measure consumer welfare using the pure characteristics demand model the model is based on a quasilinear utility function with multiplicative random variables and does not have the idiosyncratic logit error term so that consumer welfare directly reflects consumers valuation of product characteristics welfare calculations show that consumer surplus comprises approximately 90 of total social surplus and that large welfare gains have resulted from the introduction of new products

supermarket choice and supermarket competition in market equilibrium multi store firms are common in the retailing industry theory suggests that cross elasticities between stores of the same firm enhance market power to evaluate the importance of this effect in the u k supermarket industry we estimate a model of consumer choice and expenditure using three data sources profit margins for each chain a survey of consumer choices and a data set of store characteristics to permit plausible substitution patterns the utility model interacts consumer and store characteristics we measure market power by calculating the effect of merger and demerger on nash equilibrium prices demerger reduces the prices of the largest firms by between 2 and 3 8 depending on local concentration mergers between the largest firms lead to price increases up to 7 4

rocks hard places and the new protectionism textile trade policy choices in the united states and japan why have advanced industrial countries responded with different types of protectionist policy to postwar international competition and the resulting societal pressure for state action in contrast to the across the board tariff wars of the 1930s postwar protectionism is a patchwork of tariffs unilateral and nonunilateral quotas administrative restrictions state subsidies and production cartels arguments based on international economic structure international regimes statist approaches and domestic structure all appear to have difficulty in accounting for divergent trade policy choices this article introduces a more nuanced identification and integration of the international and domestic sources of the new protectionism an examination of textile trade policy in the united states and japan reveals that when state policymakers face conflicting international constraints and domestic pressure over the use of overt types of protectionist policy the greater the domestic pressure the more overt the policy response

package size and price discrimination in the paper towel market abstract estimates from a structural model of consumer behavior and firm conduct are used to decompose the extent to which quantity discounts for paper towels are consistent with second degree price discrimination as opposed to cost differences across sizes counterfactual exercises assuming that firms offer only one package size or charge uniform prices across sizes indicate that competition in the multi roll package size segment results in increased consumer surplus and lower prices for all consumers

collusion or competition interfirm relationships in the chinese auto industry the chinese passenger vehicle industry contains a large number of manufacturers some of them are members of big corporate groups centered around state owned enterprises these corporate relationships may facilitate collusion this paper applies the non nested hypothesis test methodology to data on passenger vehicles to identify whether price collusion exists within corporate groups or across groups our empirical results support the assumption of bertrand nash competition in the chinese passenger vehicle industry we find no evidence for within or cross group price collusion our policy experiments show that indigenous brands will gain market shares and profits if within group companies merge

estimating the residual demand curve facing a single firm this paper presents an econometric technique for estimating the single firm residual demand curve that does not require the estimation of demand cross elasticities the technique is particularly suited for the estimation of firm market power in product differentiated industries where cross elasticities are notoriously difficult to measure one estimated parameter is directly related to a firm s markup of price over marginal cost when product differentiation is extensive when an industry consists of a dominant firm and a price taking fringe when a consistent conjectures equilibrium is the correct oligopoly solution concept when firms are stackelberg leaders relative to their environment or when firms are perfect competitors the estimates can indicate power over price in other circumstances an instrumental variables technique is employed using firm individuated factor prices to identify firm specific residual demand yet even when instruments are unavailable the technique produces elasticity estimates biased in the conservative direction of disproving market power this methodology is applied to estimate the market power of three firms in an industry characterized by product differentiation brewing over our 1962 82 sample period pabst and coors had similar national market shares and each had high shares in several states yet pabst was virtually a price taker while coors possessed substantial market power anheuser busch had market power in the early part of the sample but little after 1975 when miller brewing changed the competitive nature of the industry

winners and losers in a major price war abstract although retail price wars have received much business press and some research attention it is unclear how they affect consumer purchase behavior this article studies an unprecedented price war in dutch grocery retailing that started in fall 2003 initiated by the market leader to halt its sliding market share the authors investigate the short and long term effects of the price war on store visits on spending and on the sensitivity of these decisions to weekly prices and price image they use a unique data set with consumer hand scan and perceptual data for a national panel of 1821 households covering two years before and two years after the price war started although the price war initially entailed more shopping around and increased spending spending per visit ultimately dropped because consumers redistributed their purchases across stores the price war made consumers more sensitive to weekly prices and price image which helped both the chain that showed an improvement in price image

regulation of pharmaceutical prices evidence from a reference price reform in denmark reference price systems for prescription drugs constitute widely adopted cost containment tools under these regimes patients co pay a fraction of the difference between a drug s pharmacy retail price and a reference price that is set by the government reference prices are either externally based on drug prices in other countries or internally based on domestic drug prices determined we study the effects of a change from external to internal reference pricing in denmark in 2005 we find that the reform led to substantial reductions in retail prices reference prices and patient co payments as well as to sizable decreases in overall producer revenues and health care expenditures the reform induced consumers to substitute away from branded drugs for which we estimate strong preferences the increase in consumer welfare due to the reform therefore depends on whether or not we take perceived quality differences into account in its calculation

capacity and product market competition measuring market power in a puppy dog industry abstract in this paper we specify and estimate a structural model which accounts for competition in two variables capacity and prices the model has a two stage setup in the first stage firms make capacity decisions followed by a product differentiated price setting game in the second stage since costs are endogenized through the first stage this has important implications for the measurement of market power in the product market in particular simpler one stage specifications would result in a bias in the measurement of market power which can be linked to the taxonomy for two stage games given in fudenberg and tirole 1984 fudenberg d tirole j 1984 the fat cat effect the puppy dog ploy and the lean and hungry look american economic review paper and proceedings 74 361 366 we then estimate this model demand cost short and long run and conduct for the european airline industry using data for the period of 1976 1990 we perform a number of specification tests and reject a simple one stage specification in favor of our two stage set up in particular we find that some degree of market power in the product market exists however market conduct in the two stage set up is significantly less collusive than in the more widely employed one stage specification which is consistent with the direction of bias in puppy dog games this illustrates that collusiveness of firms market conduct in the product market is significantly overestimated whenever capacity competition is not accounted for

switching costs in the wholesale distribution of cigarettes recent theories of price wars triggered by entry assign a critical role to switching costs in explaining price and output changes earlier elzinga and mills 1998 showed that actual switching patterns following an episode of new entry in an industry are driven by the fact that buyers have different switching costs the current paper draws on transaction specific price and shipments data surrounding the 1984 1985 price war in generic cigarettes to explore the size and determinants of switching costs among wholesale cigarette distributors results show that switching costs vary across firms and are nontrivial in magnitude several implications of the findings are discussed

voluntary export restraints profits and quality adjustment this paper develops a model of vertical differentiation to assess the impact of output constraints on the profits and quality choices of firms subject to them a competitive environment is developed with the automobile industry in mind multiproduct oligopolists producing differentiated goods who behave as coumot competitors the results show that an output constraint will not induce constrained firms to upgrade their product line when their unconstrained competitors produce higher quality models it is also shown that an output constraint can raise the profits of constrained firms despite output increases by unconstrained firms