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Introduction to Competition Analysis1 Introduction
CUTS INTERNATIONAL 7UP3 PROJECT NATIONAL TRAINING WORKSHOP ON COMPETITION POLICY AND LAW INTRODUCTION TO COMPETITION ANALYSIS1 INTRODUCTION Competition analysis is at the core of the implementation of competition policy and law since it involves the identification, investigation and evaluation of restrictive business practices (RBPs) for the purposes of remedying their adverse effects. Without a proper competition analysis, and a dedicated competition authority to undertake such analyses, it would not be possible to effectively implement even the best competition policy and law in the world. This paper briefly outlines the basic concepts of competition before discussing in more detail the process of competition analysis, covering issues such as: (i) market definition; (ii) entry conditions; (iii) competition case investigation and evaluation; and (iv) remedial action. The paper also discusses a case study on a competition case handled by the competition authority of Zimbabwe, which illustrates the practical application of the various concepts discussed. BASIC CONCEPTS OF COMPETITION The concept of competition is a difficult and complex one, but one has to get a grasp of the issues involved in order to understand and appreciate its analysis. There is no singular concept of competition. It is therefore hardly surprising that the term ‘competition’ is defined in very few, if any, competition legislation of both developing and developed countries. Schools of Thought on Competition There are a number of different uses, definitions and concepts of the term ‘competition’ depending on who one is and what purpose one wants to use the definition for2. Consumers, business persons, economists and lawyers all use different concepts and definitions of competition. -
Wage Determination and Imperfect Competition
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Booth, Alison L. Working Paper Wage Determination and Imperfect Competition IZA Discussion Papers, No. 8034 Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Booth, Alison L. (2014) : Wage Determination and Imperfect Competition, IZA Discussion Papers, No. 8034, Institute for the Study of Labor (IZA), Bonn This Version is available at: http://hdl.handle.net/10419/96758 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu IZA DP No. 8034 Wage Determination and Imperfect Competition Alison Booth March 2014 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor Wage Determination and Imperfect Competition Alison Booth Australian National University and IZA Discussion Paper No. -
Unemployment Insurance and Macroeconomic Stabilization
153 Unemployment Insurance and Macroeconomic Stabilization Gabriel Chodorow-Reich, Harvard University and the National Bureau of Economic Research John Coglianese, Board of Governors of the Federal Reserve System Abstract Unemployment insurance (UI) provides an important cushion for workers who lose their jobs. In addition, UI may act as a macroeconomic stabilizer during recessions. This chapter examines UI’s macroeconomic stabilization role, considering both the regular UI program which provides benefits to short-term unemployed workers as well as automatic and emergency extensions of benefits that cover long-term unemployed workers. We make a number of analytic points concerning the macroeconomic stabilization role of UI. First, recipiency rates in the regular UI program are quite low. Second, the automatic component of benefit extensions, Extended Benefits (EB), has played almost no role historically in providing timely, countercyclical stimulus while emergency programs are subject to implementation lags. Additionally, except during an exceptionally high and sustained period of unemployment, large UI extensions have limited scope to act as macroeconomic stabilizers even if they were made automatic because relatively few individuals reach long-term unemployment. Finally, the output effects from increasing the benefit amount for short-term unemployed are constrained by estimated consumption responses of below 1. We propose five changes to the UI system that would increase UI benefits during recessions and improve the macroeconomic stabilization role: (I) Expand eligibility and encourage take-up of regular UI benefits. (II) Make EB fully federally financed. (III) Remove look-back provisions from EB triggers that make automatic extensions turn off during periods of prolonged unemployment. (IV) Add additional automatic extensions to increase benefits during periods of extremely high unemployment. -
The Neoclassical Economics of Consumer Contracts
University of Chicago Law School Chicago Unbound Journal Articles Faculty Scholarship 2007 The Neoclassical Economics of Consumer Contracts Richard A. Epstein Follow this and additional works at: https://chicagounbound.uchicago.edu/journal_articles Part of the Law Commons Recommended Citation Richard A. Epstein, "The Neoclassical Economics of Consumer Contracts," 92 Minnesota Law Review 803 (2007). This Article is brought to you for free and open access by the Faculty Scholarship at Chicago Unbound. It has been accepted for inclusion in Journal Articles by an authorized administrator of Chicago Unbound. For more information, please contact [email protected]. Exchange The Neoclassical Economics of Consumer Contracts Richard A. Epsteint There is little doubt that the major new theoretical ap- proach to law and economics in the past two decades does not come from either of these two fields. Instead it comes from the adjacent discipline of cognitive psychology, which has now morphed into behavioral economics. Starting with the path- breaking work of Amos Tversky and Daniel Kahneman in the 1970s, the field has asked one question in a thousand guises: do ordinary people obey the principles of rational choice in making their decisions?' The usual answer given in the field is that in at least some domains they do not.2 The new law and economics literature uses these behavioral findings, especially in the study of cognitive bias, to open a new chapter in the long- standing debate over the extent to which market failures pave t The James Parker Hall Distinguished Service Professor of Law, The University of Chicago, and the Peter and Kirsten Bedford Senior Fellow, The Hoover Institution. -
Chapter 5 Perfect Competition, Monopoly, and Economic Vs
Chapter Outline Chapter 5 • From Perfect Competition to Perfect Competition, Monopoly • Supply Under Perfect Competition Monopoly, and Economic vs. Normal Profit McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. From Perfect Competition to Picking the Quantity to Maximize Profit Monopoly The Perfectly Competitive Case P • Perfect Competition MC ATC • Monopolistic Competition AVC • Oligopoly P* MR • Monopoly Q* Q Many Competitors McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Picking the Quantity to Maximize Profit Characteristics of Perfect The Monopoly Case Competition P • a large number of competitors, such that no one firm can influence the price MC • the good a firm sells is indistinguishable ATC from the ones its competitors sell P* AVC • firms have good sales and cost forecasts D • there is no legal or economic barrier to MR its entry into or exit from the market Q* Q No Competitors McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw -Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. 1 Monopoly Monopolistic Competition • The sole seller of a good or service. • Monopolistic Competition: a situation in a • Some monopolies are generated market where there are many firms producing similar but not identical goods. because of legal rights (patents and copyrights). • Example : the fast-food industry. McDonald’s has a monopoly on the “Happy Meal” but has • Some monopolies are utilities (gas, much competition in the market to feed kids water, electricity etc.) that result from burgers and fries. -
Supply and Demand Is Not a Neoclassical Concern
Munich Personal RePEc Archive Supply and Demand Is Not a Neoclassical Concern Lima, Gerson P. Macroambiente 3 March 2015 Online at https://mpra.ub.uni-muenchen.de/63135/ MPRA Paper No. 63135, posted 21 Mar 2015 13:54 UTC Supply and Demand Is Not a Neoclassical Concern Gerson P. Lima1 The present treatise is an attempt to present a modern version of old doctrines with the aid of the new work, and with reference to the new problems, of our own age (Marshall, 1890, Preface to the First Edition). 1. Introduction Many people are convinced that the contemporaneous mainstream economics is not qualified to explaining what is going on, to tame financial markets, to avoid crises and to provide a concrete solution to the poor and deteriorating situation of a large portion of the world population. Many economists, students, newspapers and informed people are asking for and expecting a new economics, a real world economic science. “The Keynes- inspired building-blocks are there. But it is admittedly a long way to go before the whole construction is in place. But the sooner we are intellectually honest and ready to admit that modern neoclassical macroeconomics and its microfoundationalist programme has come to way’s end – the sooner we can redirect our aspirations to more fruitful endeavours” (Syll, 2014, p. 28). Accordingly, this paper demonstrates that current mainstream monetarist economics cannot be science and proposes new approaches to economic theory and econometric method that after replication and enhancement may be a starting point for the creation of the real world economic theory. -
The Market Structure of Higher Learning
The Park Place Economist Volume 4 Issue 1 Article 16 5-1996 The Market Structure of Higher Learning Brett Roush '97 Follow this and additional works at: https://digitalcommons.iwu.edu/parkplace Recommended Citation Roush '97, Brett (1996) "The Market Structure of Higher Learning," The Park Place Economist: Vol. 4 Available at: https://digitalcommons.iwu.edu/parkplace/vol4/iss1/16 This Article is protected by copyright and/or related rights. It has been brought to you by Digital Commons @ IWU with permission from the rights-holder(s). You are free to use this material in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/ or on the work itself. This material has been accepted for inclusion by faculty at Illinois Wesleyan University. For more information, please contact [email protected]. ©Copyright is owned by the author of this document. The Market Structure of Higher Learning Abstract A student embarking on a college search is astounded at the number of higher learning institutions available -- an initial response may be to consider their market structure as one of perfect competition. Upon fkrther consideration, though, one sees this is inaccurate. In fact, the market structure of higher learning incorporates elements of monopolistic competition, oligopoly, and monopoly. An institution may not explicitly be a profit maximizer. However, treating it as such allows predictions of actions to be made by applying the above three market structures. -
Assessing the Comparative Performance of Competition
Assessing the comparative performance of competition authorities Khemla Prishnee Armoogum Thesis submitted for the degree of Doctor of Philosophy University of East Anglia School of Economics July 2016 This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognise that its copyright rests with the author and that use of any information derived there from must be in accordance with current UK Copyright Law. In addition, any quotation or extract must include full attribution. Abstract Finding an effective way of assessing the performance of a competition authority is an objective that recently has been widely debated by academics and practitioners. Although several methods of evaluation exist, the issue that still remains unsolved is how the assessment could be done systematically. This thesis consists of one descriptive, and four substantive chapters, the substantive chapters (3-6) includes one theoretical and three empirical, all centred on the assessment of competition law and policy enforcement. The first empirical chapter (3) studies the determinants of the reputation of a competition authority (used as a proxy for performance). In the theoretical chapter (4), a model is developed to understand how an age profile of the number of cartels detected by a competition authority can reflect the combined effects of increasing detection efficiency and greater success of deterrence over time. The second empirical chapter (5) builds on the theoretical model and studies the age profile of cartel cases detected across time and between different competition authorities. Finally, the last chapter (6) empirically examines the possible interactions between the different types of competition cases (mergers, cartels, abuse) in the presence of a competition authority which is budget constrained, and therefore must choose how to allocate its resources between these different areas. -
A Pure Theory of Aggregate Price Determination Masayuki Otaki
DBJ Discussion Paper Series, No.0906 A Pure Theory of Aggregate Price Determination Masayuki Otaki (Institute of Social Science, University of Tokyo) June 2010 Discussion Papers are a series of preliminary materials in their draft form. No quotations, reproductions or circulations should be made without the written consent of the authors in order to protect the tentative characters of these papers. Any opinions, findings, conclusions or recommendations expressed in these papers are those of the authors and do not reflect the views of the Institute. A Pure Theory of Aggregate Price Determinationy Masayuki Otaki Institute of Social Science, University of Tokyo 7-3-1 Hongo Bukyo-ku, Tokyo 113-0033, Japan. E-mail: [email protected] Phone: +81-3-5841-4952 Fax: +81-3-5841-4905 yThe author thanks Hirofumi Uzawa for his profound and fundamental lessons about “The General Theory of Employment, Interest and Money.” He is also very grateful to Masaharu Hanazaki for his constructive discussions. Abstract This article considers aggregate price determination related to the neutrality of money. When the true cost of living can be defined as the function of prices in the overlapping generations (OLG) model, the marginal cost of a firm solely depends on the current and future prices. Further, the sequence of equilibrium price becomes independent of the quantity of money. Hence, money becomes non-neutral. However, when people hold the extraneous be- lief that prices proportionately increase with money, the belief also becomes self-fulfilling so far as the increment of money and the true cost of living are low enough to guarantee full employment. -
The Socialization of Investment, from Keynes to Minsky and Beyond
Working Paper No. 822 The Socialization of Investment, from Keynes to Minsky and Beyond by Riccardo Bellofiore* University of Bergamo December 2014 * [email protected] This paper was prepared for the project “Financing Innovation: An Application of a Keynes-Schumpeter- Minsky Synthesis,” funded in part by the Institute for New Economic Thinking, INET grant no. IN012-00036, administered through the Levy Economics Institute of Bard College. Co-principal investigators: Mariana Mazzucato (Science Policy Research Unit, University of Sussex) and L. Randall Wray (Levy Institute). The author thanks INET and the Levy Institute for support of this research. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2014 All rights reserved ISSN 1547-366X Abstract An understanding of, and an intervention into, the present capitalist reality requires that we put together the insights of Karl Marx on labor, as well as those of Hyman Minsky on finance. The best way to do this is within a longer-term perspective, looking at the different stages through which capitalism evolves. -
Antitrust Policy As Corporate Welfare
ANTITRUST REFORM PROJECT ANTITRUST POLICY AS CORPORATE WELFARE CLYDE WAYNE CREWS JR. July 1997 ISSN# 1085-9049 ANTITRUST POLICY AS CORPORATE WELFARE Clyde Wayne Crews Jr. EXECUTIVE SUMMARY Political party reformers promised to roll back the regulatory states excesses during the 1994 and 1996 election cycles. While broad-based reform targeting counterproductive environmental and risk regulation didnt occur, a recognition persists that regulations often go too far. However, there has never been a fundamental rethinking of antitrust regulation. Despite the growing awareness of regulatory failure, antitrust, which purports to protect consumers by policing monopoly power, stands nearly unscathed as a model of public spirited regulation of business, an essential tool for protecting consumers from monopoly exploitation. Indeed, antitrust is usually believed essential to protecting the free enterprise system. This benign reputation of antitrust is undeserved and harmful. Policymakers of both parties especially those who believe antitrust promotes consumer welfare should rethink their allegiance. Many commentators have noted that antitrusts rhetoric of protecting the public doesnt fit with its actual tendency to penalize beneficial and efficient practices. Few today defend the actual performance record of antitrust. Defenders of antitrust still tend to think that applying better economics and hiring better judges will improve antitrust policy outcomes. Antitrust invites the special-interest exploitation of the public and successful businesses by legally facilitating the hobbling of competitors and offering the incentive of treble damage awards. There has never been an official acknowledgment that antitrust is fundamentally flawed and contrary to consumer interests. No part of antitrust law has been repealed. Today, antitrust is enjoying a higher profile in actions such as those against Wal-Mart, Microsoft, and the proposed Staples/Office Depot merger. -
Imperfect Competition and Misallocations
Imperfect Competition and Misallocations Yan Liang∗ London School of Economics, CFM Latest version here This version: July 2017 Abstract Misallocation of resources across production units lowers aggregate TFP. The factors driving misallocation can be internal or external to the market structure. Variation in markups asso- ciated with imperfect competition is an internal distortion. Taxes and subsidies on input and output markets are examples of external distortions. The study of India's manufacturing data suggests that more than 80% of the observed misallocation can be attributed to internal dis- tortions. Removing external distortions alone has a modest effect on aggregate TFP. It raises TFP by 14-17%, which is less than one fifth the compound effect of removing both types of distortions. The implication is that fostering competition is more effective to improve allocation efficiency and aggregate TFP. Removing individual external distortions is less effective. JEL Codes: O11, O47, O53. Keywords: Misallocation, Markup, Distortions, Imperfect Competition. ∗First version: May 2014. Department of Economics, and Centre for Macroeconomics, London School of Economics and Political Science, Houghton Street, London WC2A 2AE (e-mail: [email protected]). I am grateful to Francesco Caselli for his invaluable guidance and support. My gratitude extends to Gianmarco Ottaviano, Michael Peters, and seminar participants at LSE, LBS TADC for helpful comments. All errors are my own. 1 1 Introduction A growing literature has pointed out the important role of resource allocation in shaping aggregate productivity. For the allocation to be efficient, it is required that marginal products be equalized across different production units.1 Deviations from this represent misallocation and lead to a low aggregate productivity.