Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications

This paper considers the technical aspects and the consequences, in terms of simulation results and policy assessment, of introducing imperfect competition in a CGE model. The modifications to the standard CGE framework needed to model imperfect competition in some industries are briefly discussed. Next, the paper discusses whether, how much and why, those changes may affect the qualitative output of a typical simulation experiment. It is argued that technical choices made in designing the model structure may have a significant impact on the model behavior. This is especially evident when the output of the model, under an imperfect competition closure, is compared with that obtained under a standard closure, assuming perfect competition. As an illustration, a scenario of agricultural trade liberalization under alternative market structures is analyzed.Computable general equilibrium models, Imperfect competition, Oligopolistic models, Economies of scale, Empirical industrial organization, Agriculture, Trade liberalization, Trade policy

Theoretical investigations into competition, regulation, and integration in transport networks

This thesis consists of three parts. In the first part, we review the literature and some of the key issues in UK transport. We identify a need to discourage car use and the role that public transport plays in this. We discuss the various options available to policymakers to reduce problems of congestion and pollution. We note how the emphasis on deregulation and competition to promote public transport, and discourage car use, have had perverse side effects. In some cases, public transport services have become disintegrated; resulting in reductions in flexibility and increasing the generalised cost of travelling – making public transport less attractive. This raises an important question: how do we encourage a greater degree of service integration without undoing the gains from competition? The second part of the thesis, explores this issue using a theoretical transport network model. We find that various regimes involving private firms are likely to lead to the provision of an integrated ticketing system, but that not all such regimes are socially desirable. We consider how the configuration of regulatory policy may steer the private firms to produce more socially desirable outcomes.The deregulation of elements of the UK public transport network has often led to situations approaching local monopoly. The third part of this thesis investigates the private (monopoly) incentive to offer joined-up services relative to the social incentive. The more complete the service provision, the closer the match with consumer’s preferences, and the lower the generalised cost of travel. We find the monopolist does not always choose the socially desirable level of service, even when economically viable, but it may be possible to induce this provision through entry or threats of entry on a sub-set of the network.The thesis ends with a summary of the main results and suggestions for further work

Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models

In the ICT sector, product-software is an important factor for the quality of the products (e.g. cell phones). In this context, open source software enables firms to avoid quality competition as they can cooperate on quality without an explicit contract. The economics of open source (OS) versus closed source (CS) business models are analyzed in a general two- stage model that combines aspects of non-cooperative R&D with the theory of differentiated oligopolies: In stage one, firms develop software, either as OS or CS, or as a an OS-CS-mix if the license allows. In stage two, firms bundle this with complementary products and compete à la Cournot. The model allows for horizontal product differentiation in stage two. The finding are: 1.) While CS-decisions are always strategic substitutes, OS-decisions can be strategic complements. Furthermore, CS is a strategic substitute to OS and vice versa. 2.) The type of OS-license plays a crucial role: only if the license prohibits a direct OS-CS code mix (like the GPL), then Nash-equilibria with firms producing OS code exist for all parameters. 3.) In the equilibrium of a mixed industry with restricted licenses, OS-firms offer lower quality than their CS-rivals.open source, commercial open source, Cournot, R&D

CURRENT ISSUES AFFECTING TRADE AND TRADE POLICY: AN ANNOTATED LITERATURE REVIEW

This review provides a base of literature describing current issues and research on the impacts of lobalization and the industrialization of agriculture and recent approaches to analyze and model agricultural trade and trade policies. Three key factors of the survey are differentiated goods, global economic integration and international supply chain linkages. The review covers 182 publications, which are presented alphabetically by author with a brief annotation describing how it relates to the above criteria. The articles are also indexed by keyword. A brief summary highlights the documented literature and includes a series of issues for future discussion and research.International Relations/Trade,

Estimating the Impact of Ride-Hailing App Company Entry on Public Transportation Use in Major US Urban Areas

Since 2011, the private ride-hailing (RH) app companies Uber and Lyft have expanded into more and more US urban areas. We use a dynamic entry event study to examine the impact of Uber and Lyft\u27s entry on public transportation (PT) use in the United States\u27 largest urban areas. In most cases, entry into urban areas was staggered: Uber entered first, followed several months later by Lyft. We generally find that PT use increased in the representative urban area, all else equal, immediately following first RH app company entry. However, this spike in PT use largely disappeared following the entry of the second RH app company. Slightly different RH app company-PT use relationships emerge when we estimate the PT use model over various subsets of urban areas and PT modes

Vertical product differentiation and competition in the supermarket industry

Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Economics, 2000."February, 2000."Includes bibliographical references (leaves 130-137).This thesis examines the mechanisms by which retail markets converge to a concentrated structure where competition is dominated by only a few large firms. Using a model of competition based on the vertical product differentiation (VPD) enciogenous sunk cost framework proposed by Sutton (1991), several empirical implications are identified and evaluated using a detailed dataset of store level observations from the supermarket industry. Chapter 2 provides a formal test of the hypothesis that the high levels of concentration observed in the supermarket industry are the result of competitive investment in endogenous sunk costs. Using the bounds regression methodology developed in Sutton (1991), I document the existence of a large, positive lower bound to concentration that remains bounded above zero regardless of market size. This exercise is supplemented by a detailed case history of the industry that provides additional evidence that competition is focused on sunk outlays. In chapter 3, I expand the analysis by focusing on the local structure of competition. The principal contributions of the empirical work presented in this chapter involve identifying the high quality set of supermarket firms, demonstrating that they exist only in bounded numbers (do not increase proportionately with the size of the market), and identifying features of the observed market structure which are inconsistent with alternative explanations, namely by highlighting the distinctive nature of strategic complementarity. As such, I demonstrate that the VPD framework accords well with the combination of features observed in the supermarket industry, providing an accurate representation of the mechanisms sustaining its concentrated structure, which appear to be both competitive and stable. Three formal models of retail competition are presented in chapter 4, along with testable implications regarding the strategic interactions of rival firms.by Paul Bryan Ellickson.Ph.D

Antitrust Analysis of Tying Arrangements

Tying arrangements recently have been a major and contentious issue in many high profile antitrust cases in the US and Europe. Examples include the Microsoft case, the Visa and MasterCard case, and the proposed GE/Honeywell merger to name a few. This paper conducts a selective review of the recent developments in the analysis of tying arrangements. It also discusses relevant antitrust cases concerned with tying arrangements in light of recent theoretical advances in this area.

Productivity and Firm Selection: Quantifying the “New” Gains from Trade

We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects without missing other important channels of adjustment. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of firms; better exploitation of economies of scale; and, of course, efficiency gains via the selection of the most efficient firms. The model is estimated on E.U. data and simulated in counterfactual scenarios that capture several dimensions of European integration. Simulations suggest that the gains from trade are much larger in the presence of selection effects. Even in a relatively integrated economy as the E.U., dismantling residual trade barriers would deliver relevant welfare gains stemming from lower production costs, smaller markups, lower prices, larger firm scale and richer product variety. We believe our analysis provides enough ground to support the inclusion of firm heterogeneity and selection effects in the standard toolkit of trade policy evaluation.European Integration, Firm-level Data, Firm Selection, Gains from Trade, Total Factor Productivity

Information requirements for strategic decision making: energy market

Over the last two decades, the electricity sector has been involved in a challenging restructuring process in which the vertical integrated structure (monopoly) is being replaced by a horizontal set of companies. The growing supply of electricity, flowing in response to free market pricing at the wellhead, led to increased competition. In the new framework of deregulation, what characterizes the electric industry is a commodity wholesale electricity marketplace. This new environment has drastically changed the objective of electricity producing companies. In the vertical integrated industry, utilities were forced to meet all the demand from customers living in a certain region at fixed rates. Then, the operation of the Generation Companies (GENCOs) was centralized and a single decision maker allocated the energy services by minimizing total production costs. Nowadays, GENCOs are involved not only in the electricity market but also in additional markets such as fuel markets or environmental markets. A gas or coal producer may have fuel contracts that define the production limit over a time horizon. Therefore, producers must observe this price levels in these other markets. This is a lesson we learned from the Electricity Crisis in California. The Californian market\u27s collapse was not the result of market decentralization but it was triggered by other decisions, such as high natural gas prices, with a direct impact in the supply-demand chain. This dissertation supports generation asset business decisions -from fuel supply concerns to wholesale trading in energy and ancillary services. The forces influencing the value chain are changing rapidly, and can become highly controversial. Through this report, the author brings an integrated and objective perspective, providing a forum to identify and address common planning and operational needs. The purpose of this dissertation is to present theories and ideas that can be applied directly in algorithms to make GENCOs decisions more efficient. This will decompose the problem into independent subproblems for each time interval. This is preferred because building a complete model in one time is practically impossible. The diverse scope of this report is unified by the importance of each topic to understanding or enhancing the profitability of generation assets. Studies of top strategic issues will assess directly the promise and limits to profitability of energy trading. Studies of ancillary services will permit companies to realistically gauge the profitability of different services, and develop bidding strategies tuned to competitive markets