Regional monopoly and interregional and intraregional competition: the parallel trade in Coca-Cola between Shanghai and Hangzhou in China

This article uses a “principal-agent-subagent” analytical framework and data that were collected from field surveys in China to (1) investigate the nature and causes of the parallel trade in Coca-Cola between Shanghai and Hangzhou and (2) assess the geographic and theoretical implications for the regional monopolies that have been artificially created by Coca-Cola in China. The parallel trade in Coca-Cola is sustained by its intraregional rivalry with Pepsi-Cola in Shanghai, where Coca-Cola (China) (the principal) seeks to maximize its share of the Shanghai soft-drinks market. This goal effectively supersedes the market-division strategy of Coca-Cola (China), since the gap in wholesale prices between the Shanghai and Hangzhou markets is higher than the transaction costs of engaging in parallel trade. The exclusive distributor of Coca-Cola in the Shanghai market (the subagent) makes opportunistic use of a situation in which it does not have to bear the financial consequences of the major residual claimants (the principal and other agents) and has an incentive to enter the nondesignated Coca-Cola market of Hangzhou by crossing the geographic boundary between the two regional monopolies devised by Coca-Cola. The existence of parallel trade in Coca-Cola promotes interregional competition between the Shanghai and Hangzhou bottlers (the agents). This article enhances an understanding of the economic geography of spatial equilibrium, disequilibrium, and quasi-equilibrium of a transnational corporation's distribution system and its artificially created market boundary in China

DOES ELECTRONIC TRADING IMPROVE MARKET EFFICIENCY? EVIDENCE FROM SPATIAL ARBITRAGE IN THE AUTOMOTIVE MARKET

Price disparities across locations can occur when sellers in one location have difficulty matching with buyers in a different location due to the transaction costs of trading across distance. Spatial arbitrageurs exploit these discrepancies by buying goods from locations where prices are low and reselling them at locations where prices are high. Electronic channels should lower the transaction costs of trading across distance, thereby facilitating buyer/seller matching. It follows that electronic trading should reduce spatial arbitrage opportunities, thereby improving market efficiency. We test this hypothesis in the automotive market. The distinguishing feature of our data is that we can identify the distinct buyers, sellers, and vehicles involved in transactions, giving us a detailed look at transaction patterns likely motivated by spatial arbitrage. We conclude that traders are engaging in spatial arbitrage within the market but that spatial arbitrage has become less prevalent over time due to increased electronic trading

One Europe, one product, two prices-the price disparity in the EU

This article examines the price dispersion in the European Union in the last fifteen years (1990-2005). The analysis of price convergence is examined on aggregate and disaggregate levels. The macro approach is based on Comparative Price Level index calculated as the ratio between PPPs and exchange rate. The disaggregate analysis utilizes actual prices of 148 individual products sold in the 15 capital cities of the EU. The calculations comprise of sigma and beta convergence adopted from the real growth literature. The different results of the speed of convergence are obtained according to the different econometric methods. Moreover the gravity model is tested to measure the contribution of different factors in explaining the observed convergence pattern.price convergence, international price dispersion, law of one price,

Taxation for the 21st Century: The Automated Payment Transaction (APT) Tax

This paper examines the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax. In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system. The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base. The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure. The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost. Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system. ---Edgar L. Feigetax reform, APT tax, tobin tax, electric money, transaction tax, flat tax, security transaction tax, globalization, fiscal harmonization, underground economy, automated payment system, elimination of tax returns, compliance costs.

Price Discrimination & Intellectual Property

This chapter reviews the law and economics literature on intellectual property law and price discrimination. We introduce legal scholars to the wide range of techniques used by intellectual property owners to practice price discrimination; in many cases the link between commercial practice and price discrimination may not be apparent to non-economists. We introduce economists to the many facets of intellectual property law that influence the profitability and practice of price discrimination. The law in this area has complex effects on customer sorting and arbitrage. Intellectual property law offers fertile ground for analysis of policies that facilitate or discourage price discrimination. We conjecture that new technologies are expanding the range of techniques used for price discrimination while inducing new wrinkles in intellectual property law regimes. We anticipate growing commentary on copyright and trademark liability of e-commerce platforms and how that connects to arbitrage and price discrimination. Further, we expect to see increasing discussion of the connection between intellectual property, privacy, and antitrust laws and the incentives to build and use databases and algorithms in support of price discrimination

NORTH AMERICAN AGRICULTURAL MARKET INTEGRATION AND ITS IMPACT ON THE FOOD AND FIBER SYSTEM

Economic change and market dynamics have fundamentally altered the structure and performance of agricultural markets in the United States, Canada, and Mexico within the last 25 years. Many factors have helped shape the current North American food and fiber system, including technological change, domestic farm policies, international trade agreements, and the economic forces of supply and demand. Ratification of NAFTA, for example, helped integrate the North American market, sparking a surge in trade and investment among the United States, Canada, and Mexico. In recent years, efforts to further integrate the continental market seem to have slowed. Broadening the scope of NAFTA to include institutional reforms that lead to a more unified system of commercial law, the establishment of common antitrust and regulatory procedures, harmonization of product standards, and increased coordination of domestic farm, market, and macroeconomic policies would deepen market integration and enhance market efficiency and growth within North America.agriculture, market integration, market segmentation, law of one price, price transmission, elasticities, exchange-rate pass-through, market efficiency, bilateral trade intensity, regional trade agreements, NAFTA, CUSTA, trade policy, WTO, GATT, Industrial Organization, International Relations/Trade, Marketing,

Information Transparency and Market Efficiency in Blockchain-enabled Marketplaces: Role of Traders’ Analytical Ability

Classic economic theory asserts that full information transparency entails information symmetry and, thus, market efficiency. We test if this theory still holds in a blockchain-enabled marketplace where full information transparency is accomplished. We leverage the data from EnjinX, a non-fungible-token (NFT) marketplace, where the entire historical NFT transactions are symmetrically accessible to all buyers and sellers. We surprisingly observe substantial market inefficiencies. To explain this paradox that inefficiencies persist even in a fully information-transparent environment, we propose that traders’ limited analytical ability, rather than information asymmetry, ultimately drives market inefficiencies. We quantify analytical ability by examining whether traders’ performance can be augmented by machine-learning algorithms. And we find that having ten more historical transactions increases market efficiency by 1.10%. However, market efficiency could decrease by 69.02% when traders cannot effectively consume the available information. Our findings contribute to the literature by quantifying analytical ability and highlighting the analytical-ability divide phenomenon

The Capitalization of Public Services and Amenities into Land Prices – Empirical Evidence from German Communities

Applying the hedonic approach to land prices, this paper investigates the capitalization of public services and pure amenities in a cross section of German communities. Possible spill-over effects from neighboring municipalities are explicitly included in the analysis and prove to be of considerable importance. Estimates of the impacts of local attributes on land prices are obtained taking into account the spatial structure among unobserved variables. The results confirm that differences in land prices can largely be attributed to local conditions and policies. This implies a significant degree of mobility as well as a sizeable valuation of local attributes by German households.Land Prices, Hedonic Regression, Spatial Dependence