approaches and methods for the econometric analysis of market power a survey and empirical comparison this study discusses two widely used approaches in the new empirical industrial organization neio literature and examines the strengths and weaknesses of the production theoretic approach pta and the general identification method gim for the econometric analysis of market power in agricultural and food markets we provide a framework that may help researchers to evaluate and improve structural models of market power starting with the specification of the approaches in question we compare published empirical studies of market power with respect to the choice of the applied approach functional forms estimation methods and derived estimates of the degree of market power thereafter we use our framework to evaluate several structural models based on pta and gim to measure oligopsony power in the ukrainian dairy industry the pta based results suggest that the estimated parameters of oligopsony power are significantly different from zero while gim based results do not indicate any evidence of oligopsony market power in the ukrainian dairy industry moreover estimations results vary substantially due to the employed estimation procedure

measuring contagion between energy market and stock market during financial crisis a copula approach abstract in this paper we apply time varying copulas to investigate whether a contagion effect existed between energy and stock markets during the recent financial crisis using the wti oil spot price the s p500 index the shanghai stock market composite index and the shenzhen stock market component index returns evidence was found for a significantly increasing dependence between crude oil and stock markets after the failure of lehman brothers thus supporting the existence of contagion in the sense of forbes and rigobon s 2002 definition moreover increased tail dependence and symmetry characterize all the paired markets this indicates that significant increases in tail dependence are an actual dimension of the contagion phenomenon and that crude oil and stock prices are linked to the same degree regardless of whether markets are booming or crashing during the sample period finally the contagion effect is found to be much weaker for china than the us the empirical results have potentially important implications for risk management

price leadership and welfare losses in u s manufacturing comment do economists have to worry about the efficiency losses of imperfect competition textbooks especially tend to conclude that the answer is negative the truth is however that the relevant literature can be divided in two opposing parts of roughly equal size that is clearly an unsatisfactory state and novel contributions employing improved methods are therefore welcome this decade has witnessed an enormous upswing in oligopoly theory the deadweight loss literature has been influenced by that to a minor extent only avinash dixit s and nicholas stern s 1982 algorithms are however notable exceptions another valuable exception is micha gisser s 1986 attempt to apply a price leadership model for predicting the order of magnitude of the loss of consumer surplus in the united states our intention is however to show that a couple of quite reasonable modifications challenge the conclusion of small deadweight losses implied by the latter approach we do not suggest any improvement allowing for the influence of product differentiation and concentration of local markets we only note that the deadweight losses are under rather than overestimated by those omissions our contribution is to show that two other assumptions that appear in gisser s analysis are crucial for the results we find that the ideas of unitary demand elasticity and equal supply elasticity for the leaders and the price taking fringe are questionable we also point out that the output distortion percentage loss of output may be quite large even if the percentage loss of consumer surplus is small this fact seems to be ignored in the literature consider first demand elasticity gisser assumes it to be unity like arnold c harberger 1954 empirical estimates are not necessarily reliable but the fact that they are often below unity should in our opinion be taken seriously see for example m s houthakker and lester p taylor 1966 and for the u s food and tobacco industries emilio pagoulatos and robert sorensen 1986 gisser s technique of predicting welfare losses means that realistic values of demand elasticity and concentration are inserted in a formula that is derived from a theoretical model it is therefore inadequate to limit its applicability to the case of unitary elasticity which appears dubious from an empirical standpoint consider then supply elasticity gisser assumes that both the leading group and the fringe of price taking firms have the same supply elasticity our intention is not to discuss the behavior of firms in detail but we nevertheless find it questionable that firms assume the roles as either active leaders or passive price takers if their technologies are more or less identical why do firms not dominate because they have a larger supply elasticity it could even be considered a styl acting professor department of economics abo akademi the swedish university of turku fanriksgatan 3 sf 20500 turku finland participants in the department s research seminars have delivered useful criticism i thank leila stahl for research assistance remaining errors are my own losses that are less than 1 percent of gnp are reported by arnold c harberger 1954 david schwartzman 1960 frederick w bell 1968 dean worcester 1973 john siegfried and thomas k tiemann 1974 bjmrn wahlroos 1984 and outside the united states wahlroos 1984 finland losses that are larger than 1 percent and usually larger than 3 percent are reported by david kamerschen 1966 and keith cowling and dennis c mueller 1978 for the united states the losses may be large in the uk according to cowling and mueller 1978 and malcolm c sawyer 1980 and in france according to frederick jenny and andre paul weber 1983 simulations in different types of models by abram bergson 1973 j a kay 1983 and g k yarrow 1986 suggest losses that are at least potentially large

does oil move equity prices a global view many studies indicate that oil price shocks have an adverse effect on real output and hence an adverse effect on corporate profits where oil is used as a key input the present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns to this end we analyse 35 datastream global industry indices for the period from april 1983 to september 2005 our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining and oil and gas industries generally these results are consistent with economic theory and evidence provided by previous empirical studies little evidence of any asymmetry is detected in the oil price sensitivities in light of our findings we recommend that international portfolio investors consider hedging oil price risk

a comparison of oligopoly welfare loss estimates for u s food manufacturing capitalizing on theoretical advances in calculating deadweight welfare losses due to imperfect competition we compare eight empirical estimates for the u s food manufacturing industries the estimates incorporate varying theoretical assumptions about demand supply and firm pricing behavior and utilize various data sources time periods and assumptions about the proper competitive benchmark while the estimates of average allocative losses range widely there is a high degree of congruence in the rankings of economic losses due to market power thus from the perspective of efficient antitrust enforcement the newer theoretical oligopoly approaches and the traditional structure conduct performance models would target similar industries

macro economy stock market and oil prices do meaningful relationships exist among their cyclical fluctuations this paper examines the relationship among consumer price index industrial production stock market and oil prices in greece initially we use a unified statistical framework cointegration and vecm to study the data in levels we then employ a multivariate var model to examine the relationship among the cyclical components of our series the period of the study is from 1996 1 to 2008 6 findings suggest that oil prices and the stock market exercise a positive effect on the greek cpi in the long run cyclical components analysis suggests that oil prices exercise significant negative influence to the stock market in addition oil prices are negatively influencing cpi at a significant level however we find no effect of oil prices on industrial production and cpi finally no relationship can be documented between the industrial production and stock market for the greek market the findings of this study are of particular interest and importance to policy makers financial managers financial analysts and investors dealing with the greek economy and the greek stock market

industrialization and consolidation in the u s food sector implications for competition and welfare good sources for information on recent developments in food market structure include barkema drabenstott and welch u s department of agriculture 1996b and rogers my objective is not to add to this literature but rather to consider what we have learned as a profession about the rapid consolidation in food processing and distribution what are its implications for market power economic efficiency and the distribution of economic welfare among producers consumers and marketers

measuring market power in multi product oligopolies the us meat industry this paper develops and estimates an economic model for measuring market power in a quantity setting oligopoly engaged in the joint production of demand related goods the model which allows for firms conjectures about both same and cross market responses to own output variation is applied to the us meat beef and pork industry he hypothesis that the industry s equilibrium reflects price taking behaviour is rejected the hypothesis of no cross effects cannot be rejected roughly half of the farm to retail price spreads for beef and pork appear to be attributable to market power

agricultural trade liberalization and economic development the role of downstream market power a model is developed to characterize the vertically linked and concentrated nature of developed country food markets this model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing country exporters of agricultural commodities from trade liberalization by developed countries results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country the distributional effects under downstream market power differ significantly from the perfectly competitive case and may result somewhat paradoxically in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs

wti crude oil futures in portfolio diversification the time to maturity effect the aim of the paper is to analyze the diversification effect brought by crude oil futures contracts the most liquid commodity futures into a portfolio of stocks the studies that have documented the very low and essentially negative correlations between commodities and equities typically rely on normally distributed returns which is not the case for crude oil futures and stocks indexes moreover the particular time to maturity chosen for the future contract used as an investment vehicle is an important matter that needs to be addressed in presence of forward curves switching between backwardation and contango shapes our goal in this paper is twofold a we introduce copula functions to have a better representation of the dependence structure of oil futures with equity indexes b using this copula representation we are able to analyze in a precise manner the maturity effect in the choice of crude oil future contract with respect to its diversification benefits our finding is that in the case of distant maturities futures e g 18 months the negative correlation effect is more pronounced whether stock prices increase or decrease this property has the merit to avoid the hurdles of a frequent roll over while being quite desirable in the current trendless equity markets empirical evidence is exhibited on a database comprising the nymex wti crude oil futures and s p 500 index over a 15 year time period

price leadership and welfare losses in u s manufacturing reply a model of price leadership is used to estimate the welfare losses dueto monopoly in u s manufacturing given that the leaders behave independently an hypothesis confirmed empirically the deadweight lossis estimated at 0 114 percent of gnp based on a sample of 445 four digit industries this estimate lends strong support to arnold c harberger s finding of thirty years ago copyright 1986 by american economic association

what determines the elasticity of industry demand abstract this paper develops estimates of price elasticity of demand for a sample of u s food and tobacco manufacturing industries and tests a model explaining differences in interindustry elasticity the empirical results are consistent with the hypothesis that demand elasticity is in part determined by the competitive behavior of firms in an industry in particular high advertising expenditures result in lower elasticities of demand other important variables influencing demand elasticity are industry concentration the stage of production the existence of protection from domestic and foreign entry and the extent of new product introduction in a particular market

relationships between oil price shocks and stock market an empirical analysis from china this paper investigates the interactive relationships between oil price shocks and chinese stock market using multivariate vector auto regression oil price shocks do not show statistically significant impact on the real stock returns of most chinese stock market indices except for manufacturing index and some oil companies some important oil price shocks depress oil company stock prices increase in oil volatility may increase the speculations in mining index and petrochemicals index which raise their stock returns both the world oil price shocks and china oil price shocks can explain much more than interest rates for manufacturing index

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

structural change in factor demand relationships in the u s food and kindred products industry this analysis utilizes multivariate gradual switching regression techniques and bayesian inferential procedures to evaluate structural change in factor demand relationships in the food manufacturing industry food materials are included as an input into the food manufacturing industry the results confirm a significant gradual structural change that initiated in 1980 price elasticities indicate that the demands for raw food materials and energy have become more elastic while the demand for labor has become less elastic morishima elasticities of substitution indicate that nearly all factors are substitutes and that the degree of substitutability has significantly increased in recent years

oligopoly power in the food and tobacco industries in this article we estimate and test for the degree of oligopoly power and economies of scale in forty food and tobacco industries using the new empirical industrial organization neio framework and four digit sic data lerner indices and elasticities of scale are compared throughout the entire food and tobacco industries t tests verify that all but three of these industries exert statistically significant degrees of oligopoly power and that over 82 of these industries exhibit nonconstant returns to scale the empirical results also provide estimates of the price elasticities of demand for each industry

input substitution economies of scale and productivity growth in the us upholstered furniture industry cost factor demand and productivity growth are considered in the upholstered furniture industry over 1958 87 factors are divided into labour capital and materials it is found that all inputs are substitutes in production although substitution elasticities are small factor demand is price inelastic for all inputs the industry operates around minimum average cost productivity growth is small but significant the results indicate that labour will continue to be important in the industry however regional comparative advantage is not related to labour alone the results suggest that policies to attract or retain the industry must consider the low degree of factor substitution

market concentration contestability and sunk costs this paper provides an exploratory assessment of the theory of contestability that is based on a diverse sample of industries and introduces a new important determinant of market concentration the results of the paper indicate that the variables determining the degree of contestability of markets are significant correlates of market concentration sunk costs account for a substantial portion of the sample variance of concentration even after technological factors are controlled for copyright 1990 by mit press

testing oligopolistic behavior abstract this paper develops an empirical model of short run pricing behavior for firms in a homogeneous product oligopoly it is based on the variable profit function and related output supply and factor demand equations and is used to analyze the behavior of firms in the coffee roasting industry a parametric test of the dominant firm model is developed and applied the hypothesis of dominant firm behavior and cournot behavior are rejected the hypothesis of price taking behavior is rejected for the largest two firms in the industry but is not rejected for all other firms using the estimated pattern of firm behavior an index of overall industry performance is constructed

estimating the degree of market power in the beef packing industry a technique for assessing the degree of monopoly power developed by appelbaum 1979 1982 is extended here to permit measurement of monopsony power as well data from the u s beef packing industry are examined the results reveal small but statistically significant monopoly monopsony price distortions in slaughter cattle and wholesale beef markets but in spite of a recent trend toward heightened concentration in the industry give no indication that performance has become appreciably less competitive of late this abstract was borrowed from another version of this item

seasonal oligopoly power the case of the us fresh fruit market what has been ignored in much of the existing studies of oligopoly power is that market behaviour need not be static in nature and oligopoly power in agriculture need not be present in every month of the year in a market which is characterized by seasonality and supplied by different sources during different seasons it is quite possible to observe oligopoly power during different months of the year in this paper a method for estimating and testing for seasonal changes in the degree of oligopoly power is introduced it was found that in the pear market oligopoly power coefficients remain low throughout the year on the other hand the grape market is characterized by higher oligopoly power coefficients and considerable season variations

imperfect competition in multiproduct food industries with application to pear processing agricultural product markets often involve relatively few firms processing a farm product into multiple processed products this market structure prompts concern that processing firms may exercise both oligopsony and oligopoly power the present paper develops and applies a methodology to test simultaneously for market power in both the raw input market and multiple processed output markets application of the methodology to california pear processing indicates the industry has exerted power in both its farm input market and the markets for canned pears and fruit cocktail

oligopoly structure and the incidence of cigarette excise taxes abstract a model of oligopoly price behavior and tax incidence for the u s cigarette industry for the period 1955 1990 is presented a cost function is estimated and shows manufacture to be subject to increasing returns to scale the mean price elasticity of demand is 0 71 the model indicates that competition among manufacturers has been decreasing since 1980 a simulation shows that an increase in the federal excise tax causes a greater increase in price and a greater decrease in consumption than does the same increase in the average of state and local tax rates

how do crude oil prices co move a copula approach abstract this paper examines the dependence structure between crude oil benchmark prices using copulas by considering several copula models with different conditional dependence structures and time varying dependence parameters we find evidence of significant symmetric upper and lower tail dependence between crude oil prices these findings suggest that crude oil prices are linked with the same intensity during bull and bear markets thus supporting the hypothesis that the oil market is one great pool in contrast with the hypothesis that states that the oil market is regionalized our findings on crude oil price co movements also have implications for risk management hedging strategies and asset pricing

an economic analysis of technology in the meat products industry the meat products industry underwent significant structural change during the last two decades the relocation and expansion of commercial cattle feeding stimulated development of new single species slaughtering facilities to replace older multi species plants an essentially new processing industry arose specializing in breaking and packaging carcasses this forward integration has significantly changed distribution methods of slaughtering and fabricating firms increased emphasis on coordination of inputs led to interest in backward integration from packing into cattle feeding the steer and heifer slaughtering sector which was decentralized and competitive in the 1950s has turned toward centralization and concentration although the largest firm accounted for only 13 of total u s steer and heifer slaughter in 1977 it had more than doubled its share since 1970 in 1978 this firm slaughtered more than twice as many steers and heifers as its nearest competitor in addi

demand for coffee in sweden the role of prices preferences and market power there is a widespread belief that consumer coffee prices are high relative to bean prices and that lower consumer prices would lead to substantial increases in bean exports from third world countries this issue is evaluated by analysing how retail prices preferences and market power influence coffee demand in sweden a demand function is estimated for the period 1968 2002 and used together with information on import prices of coffee beans to simulate an oligopoly model this approach gives estimates of the maximum average degree of market power and shows how coffee demand would react to reductions in marginal cost to its minimum level the maximum level of market power is found to be low but it generates large spreads between consumer and bean prices because the price elasticity has low absolute values moreover the impact of a price decrease would be small because long run coffee demand is dominated by changes in the population structure in combination with different preferences across age groups hence a change to perfect competition would only have a negligible effect on bean imports

the wealth of the unemployed many studies have investigated the adequacy of unemployment insurance ui benefits as a form of income replacement but few have looked at other resources with which the unemployed can finance their unemployment spells this paper focuses on one form of resources own wealth holdings the author finds that the median worker s financial assets can cover roughly two thirds of the income loss from an unemployment spell wealth holdings vary tremendously however and almost one third of workers are unable to replace even 10 of their income loss moreover predicted wealth holdings decline precipitously with realized unemployment durations both absolutely and especially relative to actual income loss this finding together with the finding that individuals who are eligible for more generous ui draw down their wealth more slowly than do others during unemployment spells suggests that ui benefit adequacy could be increased if the benefits were targeted to those with longer unemployment spells

the impact of food scares on price adjustment in the uk beef market abstract this paper considers the impact of food scares predominately concerns relating to bse on uk beef prices at retail wholesale and producer levels over the 1990s acknowledging the co movement that exists between prices in the meat marketing chain we use a co integrating framework the results of which show the importance of publicity regarding the safety of food in the transmission of beef prices in the uk the food publicity index that we use has a marked negative impact on the prices at all levels a result that is consistent with the effect of an inward shift in the demand function moreover the extent of price decline varies between the marketing stages entailing that the price spreads rise in response to an increase in the negative publicity about food safety while not a formal test of market power these observations are consistent with recent theoretical results demonstrating that market power exacerbates price changes in the upstream sectors for a given change in the retail demand function the implication of these varying price changes is that the food safety concerns also cause the marketing margins between the stages to widen the uk s competition commission has recently investigated the abuse of market power in the food sector inspired largely by this specific issue