A Helicopter Tour of Some Underlying Issues in Empirical Industrial Organization

This review considers conceptual issues underlying empirical work on markets. It is divided in three parts. The first part reviews the analysis of demand and equilibrium in retail markets and then considers recent advances in the analysis of markets that require different assumptions: markets where adverse selection and moral hazard may be important, vertical markets with bargaining, and markets wherein a centralized allocation mechanism replaces prices. The second part considers the analysis of cost and production. It reviews the simultaneity and selection issues in production function estimation and then considers the distinction between revenue- and quantity-generating functions and its implications for the analysis of markups, as well as the empirical analysis of fixed costs and its implications for the analysis of product repositioning. The review concludes by considering issues that arise due to the complexity of the empirical analysis of market dynamics and appropriate ways of dealing with them.

Market Power in the Irish Beef Processing Industry

Irish beef processors and cattle farmers have been involved in a lasting controversy on power asymmetry. This paper estimates the degree of market power in the Irish beef processing industry. The New Empirical Industrial Organization approach is extended for estimation, and the market power is testified by conjectural elasticity with supply and demand functions, indicating that beef processors exert a significant market power on cattle farms. Export-orientation and high subsidies are two outstanding features in the Irish beef industry. Exports and subsidies are shown in this paper to have an insignificant influence on market power. This paper confirms that beef processors can exercise market power on farmers to lower prices below the marginal cost.

Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

This article considers the recent literature on firm markups in light of both new and classic work in the field of industrial organization. We detail the shortcomings of papers that rely on discredited approaches from the “structure-conduct-performance” literature. In contrast, papers based on production function estimation have made useful progress in measuring broad trends in markups. However, industries are so heterogeneous that careful industry-specific studies are also required, and sorely needed. Examples of such studies illustrate differing explanations for rising markups, including endogenous increases in fixed costs associated with lower marginal costs. In some industries there is evidence of price increases driven by mergers. To fully understand markups, we must eventually recover the key economic primitives of demand, marginal cost, and fixed and sunk costs. We end by discussing the various aspects of antitrust enforcement that may be of increasing importance regardless of the cause of increased markups.

ANÁLISE ESTRUTURAL DO MERCADO BRASILEIRO DE PICAPES PEQUENAS

A venda de picapes pequenas no Brasil é altamente concentrada em quatro empresas, em que a Fiat tende a ter a maior participação de mercado, em termos de unidades vendidas. Assim, o objetivo desta pesquisa foi testar a ocorrência de exercício de poder de mercado no segmento de picapes pequenas. O referencial teórico teve como base a teoria da New Empirical Industrial Organization (NEIO) e aplicou-se o modelo econométrico baseado em Berry et al. (1995), um modelo estrutural de demanda e oferta para estimação do equilíbrio de mercado, onde aplica-se um modelo randômico de utilidade para derivar a demanda e assume-se que o logaritmo do custo marginal é linear em relação ao custo dos atributos. Os resultados mostram que o markup médio ponderado do segmento é de cerca 12% e que a estratégia de competição das firmas oscila ao longo do tempo. Portanto, foi possível rejeitar a hipótese nula de que os modelos de competição de Bertrand e de cooperação são indistinguíveis em favor da cooperação em alguns subperíodos.

PROSEDUR UJI KEPATUHAN TERHADAP PRINSIP BERSAING ISLAMI PADA INDUSTRI PERBANKAN SYARIAH: SEBUAH PROPOSAL BERDASARKAN TEORI DAN KAJIAN EMPIRIS ORGANISASI INDUSTRI

An industry in Islamic Economics is required to compete perfectly regardless of its market structure. How to ensure this rule being implemented in reality, however, has been neglected either in literatures or by industry supervisors. This paper is aimed at proposing a systematic procedure to test the industry compliance toward islamic competition rules. The advance of theory and empirics of New Empirical Industrial Organization is used to formulate the procedure. There are two conditions to satisfy for an industry to have an islamic competition. The first and necessary condition is rejecting the Traditional Hypothesis which is based on collutive bahaviour of dominant banks. The second and sufficient condition is, the perfect competition is driven more by the intention of syariah compliance rather than due to the pressure of contestability. Keywords: SCP Paradigm, Perfect Competition, Contestable Market, Traditional Hypothesis, New Empirical Industrial Organization, Islamic Competition, Structural Approach, Nonstructural Approach, Panzar and Rosse Model