is an oligopoly market (OLI-NASH) and that the corn market behaves like a PCO. An additional feature of WELCOM is that it enables users to study multiple sectors simultaneously under different market structures.

WELCOM also allows the user to choose the type of welfare function applied to assess the impacts of the competition reforms. There are three alternative money metric measures available to assess changes in welfare: (a) Laspeyres, (b) equivalent variation, or (c) compensated variation. The latter two options also require the selection of the functional forms to define the utility function of a household. The options available for the simulation method are (a) Cobb-Douglas and (b) constant elasticity of substitution (CES).<sup>18</sup> The user then needs to define the original and final conditions or the characteristics of the market under analysis. The default scenario assumes that the policy reform enhances competition in the market (that is, the movement from concentration to competition); however, the tool also allows an analysis of the opposite scenario (from a competitive market to a market with higher concentration). WELCOM also enables the user to carry out the simulations in gradual steps, thereby providing users with the option to see the gradual liberalization or concentration of sectors of interest, while also focusing on providing the extreme case of perfect (imperfect) competition to determine upper-bound estimates of such an outcome.

In sum, the empirical analysis produced by the WELCOM tool will be based on microeconomic models in which the household is the unit of reference. The data requirements of the module include a representative sample of the population, information on total household expenditures, and household expenditures on the product of interest where the market concentration is observed, or the competition policy reform is expected.

# **4. The Mexico case study**

Mexico is well known for its history of monopolies, including TELMEX on fixed lines (privatized in 1990) and PEMEX in fuel (a state-owned enterprise opened to competition only after 2013), as well as an oligopoly in corn products, an important staple for households in the country.<sup>19</sup> These monopolies and oligopolies emerged because of government intervention and weak regulations and did not deliver the intended results they were originally established to meet (Del Villar 2009). Plagued by low productivity and limited innovation, resulting in high prices for consumers, these monopolies have become an integral part of Mexico’s paradoxical growth performance, especially because recent estimates have concluded that there exists an average 98.2 percent markup in goods across households (Aradillas 2018). This paper shows some stylized facts on the degree of concentration in the two industries selected (mobile telecommunication and corn products) to illustrate the simulation approach, as well as some descriptive statistics, including household expenditures on categories linked to these two industries.

The key data source necessary to use WELCOM is a representative household expenditure survey. In the case of the two sectors studied, the per capita household share of expenditures on mobile

> 18 See Abdelkrimm et al. (2018).

> 19 For TELMEX, see See Acemoglu and Robinson (2013). The category of corn products includes grain corn, maize flour, mass of corn, corn tortilla, toast, and other maize products.

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