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Review of Marketing Research
Type: Book
ISBN: 978-0-85724-723-0

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Article
Publication date: 27 April 2020

Jiawu Dai, Xiuqing Wang and Guang Yuan

The effect of market power on allocative efficiency is one of the most important topics in industrial organization and has undergone rigorous investigation since the…

Abstract

Purpose

The effect of market power on allocative efficiency is one of the most important topics in industrial organization and has undergone rigorous investigation since the 1970s. However, empirical studies based on firm-level data are relatively rare, especially with regard to China's tobacco and food industries. Accordingly, this research measures market power and allocative efficiency loss (AEL) of the main tobacco and food industries in China with micro data at firm level. Subsequently, it conducts a comparative analysis on them.

Design/methodology/approach

This research applies the New Empirical Industrial Organization (NEIO) model, consisting of five pricing and demand simultaneous equations to measure market power, and the AEL model to measure AEL induced by market power. To match with the micro data at firm level, the study implements a change in the traditional NEIO model by abandoning the aggregating process.

Findings

Empirical results show that China's tobacco industry, among five sectors selected, has the largest market power and thus the highest degree of AEL, whereas other sectors have apparently smaller market power and lower levels of AEL. Comparative analysis demonstrates a coarse positive correlation between market power and AEL in the selected industries. In general, the results accord well with the existing empirical findings and the reality.

Research limitations/implications

This study has some deficiencies. First, owing to the limitation of high-quality data, the sectors analyzed in this research are insufficient to sum up all the characteristics and rules of China's whole food industry. Second, this research only analyzes seller market power and leaves out buyer market power, which could be a direction for future research.

Practical implications

The relevant administrations should strictly limit the monopoly behaviors of enterprises and establish a favorable and competitive market environment, especially for the tobacco industry. This suggestion is precisely an important content of China's Supply-side Reform.

Originality/value

The research improves the NEIO model in that it can be estimated with micro data at firm level. To the best knowledge of the authors, very few empirical and comparative analyses exist on market power and AEL for China's tobacco and food manufacturers using micro data.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 10 no. 3
Type: Research Article
ISSN: 2044-0839

Keywords

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Article
Publication date: 4 September 2017

Baowen Sun, Wenjun Jing, Xuankai Zhao and Yi He

This paper aims to clear whether the monopoly structure of the internet industry has produced market power and discussed the welfare change of the internet industry monopoly.

Abstract

Purpose

This paper aims to clear whether the monopoly structure of the internet industry has produced market power and discussed the welfare change of the internet industry monopoly.

Design/methodology/approach

By using new empirical industrial organization methods and taking the e-commerce market as an example, the authors measured market power and economies of scale of the internet platform companies.

Findings

Internet platform enterprises have formed scale economy, but it has not had market power, and the industry still maintains high levels of competition; also, the emergence of large enterprises may increase the welfare of consumers.

Originality/value

The conclusion of this paper clarified actual competition status of internet industry and provided a new foothold for regulation and ideas for the traditional industry to crack the Marshall Conflict.

Details

International Journal of Crowd Science, vol. 1 no. 3
Type: Research Article
ISSN: 2398-7294

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Article
Publication date: 20 February 2017

Xunan Feng, Jin Xu, Ying Wang and Chunyan Tang

Using the sample between 2005 and 2011, the purpose of this paper is to investigate the effect of a new fund entry on incumbents using the overlap measure in portfolio holdings.

Abstract

Purpose

Using the sample between 2005 and 2011, the purpose of this paper is to investigate the effect of a new fund entry on incumbents using the overlap measure in portfolio holdings.

Design/methodology/approach

Empirical methodology is used in this study.

Findings

The authors find that incumbents that have a higher overlap with the entrants underperform subsequently. Based on the characteristic-based approach of Daniel et al. (1997), the authors find that the characteristic selectivity component is negatively correlated with the overlap measure, and thereby the decline in performance is driven by the stock-picking ability. The authors also discuss the unobserved actions of incumbents using the approach proposed by Kacperczyk et al. (2008) and find that incumbent unobserved actions do not benefit mutual fund investors in China. Finally the authors find that investors respond to the supply-side competition between entrants and incumbents quickly. These findings help us understand the mutual fund completion in China.

Originality/value

The findings in this study can help scholars, industry experts and regulatory authorities to understand the effect of competition in Chinese mutual fund industry.

Details

China Finance Review International, vol. 7 no. 1
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 15 August 2019

Hao Lan and Xiaojin Wang

The purpose of this paper is to investigate market power in the Chinese pork supply chain. The authors aim to explain why a steady rise in prices is observed in the…

Abstract

Purpose

The purpose of this paper is to investigate market power in the Chinese pork supply chain. The authors aim to explain why a steady rise in prices is observed in the sector, apart from existing evidence on incomplete/asymmetric cost pass-through and concerns of growing concentration and consolidation in the sector.

Design/methodology/approach

This study uses a new empirical industrial organization model for both oligopoly and oligopsony power to measure the degree of market power exerted on consumers and hog farmers simultaneously.

Findings

By examining annual panel data across provinces in China, the authors find that both oligopoly and oligopsony powers exist in the pork supply chain. In particular, the authors determine that a higher degree of market power is found to influence prices paid to hog farmers than prices paid by pork consumers. Estimates of key elasticities in the Chinese pork supply chain are also updated based on the structural model estimation and the latest data.

Research limitations/implications

Due to the lack of data at a more granular level of geography, the authors are only able to estimate market power by three major economic regions.

Practical implications

The findings provide useful information for future policy analyses of Chinese food markets. First, the pork-packing industry should be of great concern in terms of market power and its influence on consumers’ and farmers’ welfare. It is essential to take into consideration market power in the pork supply chain before making any public policy regarding the pork market. Furthermore, following economic theory and experience from developed countries, large meat packers will eventually vertically control hog farmers given their stronger oligopsony power over the upstream. Vertical integration may be the next important issue in terms of food market competition. Finally, the results may also draw the government’s attention to investigating market competition in all major food markets.

Originality/value

The empirical evidence draws attention to the issue of food market competition in one of the largest and most important meat-packing markets in China. The authors hope to encourage further discussions on pork and hog market regulations and related public policies.

Details

China Agricultural Economic Review, vol. 12 no. 1
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 14 September 2010

Felipe Ruiz‐Moreno, Antonio Ladrón‐de‐Guevara and Francisco Mas‐Ruiz

The main objective of this paper is to propose a model that allows the detection of the competitive pattern of the Spanish loans market between 1992 and 1996.

Abstract

Purpose

The main objective of this paper is to propose a model that allows the detection of the competitive pattern of the Spanish loans market between 1992 and 1996.

Design/methodology/approach

In order to achieve this objective, the paper estimates, following the New Empirical Industrial Organization paradigm, a conjectural variation model for the strategic marketing dimension of price. The model proposed allows the measurement of strategic group‐level rivalry while simultaneously considering demand, costs, and profit specifications for each bank.

Findings

The findings evidence a high degree of competition between the firms within the same strategic group. Further, the demand for loans of a firm has a positive (negative) relationship with the rivals' price (own price), with the own branch network (rivals' branch network), and with the economic activity in the regions where firm operates.

Research limitations/implications

The major limitation of this research could become from the necessity to operate with detailed information that the authors try to overcome using proxies of several non‐available variables.

Originality/value

The model proposed herein represents a contribution to previous works and also provides more information about banking competition in the sense that it estimates price competition between firms within three strategic groups.

Details

International Journal of Bank Marketing, vol. 28 no. 6
Type: Research Article
ISSN: 0265-2323

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Article
Publication date: 18 April 2017

Cupian and Muhamad Abduh

The purpose of this paper is to examine the competitive conditions and market power of Islamic banks in Indonesia for the period of 2006-2013.

Abstract

Purpose

The purpose of this paper is to examine the competitive conditions and market power of Islamic banks in Indonesia for the period of 2006-2013.

Design/methodology/approach

Using samples of 27 Islamic banks, the study uses a variety of structural and non-structural measures related to the traditional approach and the new empirical approach of the industrial organization. The methodology is based on a set of measures of the competition and market power. The first measures, concentration ratios and Herfindahl–Hirschman index, are to determine the competitiveness level, while the second measures of Panzar–Rosse H-statistic and Lerner index are to examine the market power of Islamic banks in Indonesia.

Findings

The finding of this study has confirmed the situation of Islamic banking industry in Indonesia which is operated in a higher degree of market power which leads to a less competitive market. Islamic banks earn their revenues under monopolistic competition over the tested period. This study has also found a negative but insignificant relationship between concentration and competition which shows that in the past few years, the market power for leading firms in Indonesia Islamic banking industry has reduced.

Practical implications

The paper is a very useful source of information that may provide relevant guidelines in guiding the future development of competition of Islamic Banking industry. In addition, the paper provides relevant guidelines for improving competitiveness of Islamic banks.

Originality/value

This study combines two approaches for bank competition measurement and bank market powers measurement which can provide more robust findings. To the best of the authors’ knowledge, the study on Islamic banking competitiveness level and market power is very limited, especially in the case of Indonesia. Therefore, this study could contribute significantly toward the literature of the related field.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 10 no. 1
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 22 July 2020

Bijoy Rakshit and Samaresh Bardhan

The paper measures the degree of bank competition in Indian banking over the period 1996–2016. Using bank-level annual data, we revisit the case of banking competitiveness…

Abstract

Purpose

The paper measures the degree of bank competition in Indian banking over the period 1996–2016. Using bank-level annual data, we revisit the case of banking competitiveness during the prefinancial and postfinancial crisis and examine whether the global financial crisis alters the level of bank competition in India. Additionally, this paper addresses the misspecification issues associated with the widely used Panzar–Rosse model in Indian banking context.

Design/methodology/approach

We apply Panzar and Rosse (1987) H-statistic and evaluate the degree of bank competition by estimating the extent to which changes in input prices are reflected in revenues earned by banks. Subsequently, we link this measure of competitiveness to a number of structural indicators (HHI and CRn) to examine the structure-conduct-performance hypothesis, which assumes that a concentrated banking system can impair competition. The simple panel regression model was used to handle the empirical estimations.

Findings

findings reveal that the Indian banking system operates under competitive conditions and earns revenues as if under the monopolistic competition. We also find evidence that Indian banks are competitive, even under a concentrated market structure. This observation runs, in contrary, to the prediction of the structure–conduct–performance hypothesis. The findings also indicate the differences in the estimated H-statistic value after considering the misspecifications of the P–R model.

Practical implications

From policy perspectives, policymakers should focus more on maintaining an optimal level of bank competition by mitigating entry restrictions, exercising less consolidation and withdrawing overregulation from banking activities. A competitive banking industry ensures both efficiency and stability.

Social implications

A competitive banking sector by lowering interest rates margin provides easier access to finance to both households and small and medium enterprises (SMEs).

Originality/value

This is the only study that addresses the misspecification of the P–R model while assessing competition in Indian banking and provides a thorough understanding of the role of concentration on bank competition.

Details

Managerial Finance, vol. 46 no. 11
Type: Research Article
ISSN: 0307-4358

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Book part
Publication date: 29 December 2016

Hanh Thi My Phan and Kevin Daly

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India…

Abstract

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India, Philippines, Malaysia, and Vietnam) over pre and post the 2008 global financial crisis. The conduct parameter approach following the framework suggested by Uchida and Tsutsui (2005) is used to estimate bank competition in these countries. The study employs both seemingly unrelated regression (SUR) and three-stage least squares (3SLS) to estimate simultaneously the system of equations in our model. Generally we find a negative association between market concentration and bank competition across most of the countries in the study suggesting that banks in concentrated markets collude to generate higher profits. Monopolistic competition was the best description of competitive structure of banking across the majority of countries investigated by this study. The study fills the gap in the banking literature by investigating bank competition, concentration, and their relationship across emerging Asian economies over the 2008 global financial crisis. Moreover, several policy implications for banking industry are suggested.

Details

Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

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Book part
Publication date: 25 June 2010

Nicholas Mercuro

The first contribution to this section is by Richard Schmalensee titled “Thoughts on the Chicago school legacy in U.S. antitrust.” It appears the purpose of this essay is…

Abstract

The first contribution to this section is by Richard Schmalensee titled “Thoughts on the Chicago school legacy in U.S. antitrust.” It appears the purpose of this essay is to set up a target for the rest of the contributors to shoot at – a target that is emphatically pro-Chicago. In his essay, Schmalensee reviews some of the aspects of U.S. antitrust policy that outraged Chicago school lawyers and economists in the 1970s. He takes a brief look at some of Chicago's subsequent victories that he claims are now generally accepted as positive changes. And finally, he argues that some of Chicago's lost battles also constitute positive aspects of its legacy. His discussion is focused on four broad issues: the objectives of antitrust, the past policy toward “no-fault” concentration, the treatment of productive efficiency, and the evaluation of non-standard business conduct (pp. 11–12).

Details

A Research Annual
Type: Book
ISBN: 978-0-85724-060-6

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