Perfect Competition in an Oligoply (including Bilateral Monopoly)

We show that if limit orders are required to vary smoothly, then strategic (Nash) equilibria of the double auction mechanism yield competitive (Walras) allocations. It is not necessary to have competitors on any side of any market: smooth trading is a substitute for price wars. In particular, Nash equilibria are Walrasian even in a bilateral monopoly.Limit orders, double auction, Nash equilibria, Walras equilibria, mechanism design

Trade Liberalization and Macroeconomic Performance in Cameroon: An Imperfect Competition Approach

This article analyzes the impact of trade liberalization in a situation of imperfect competition (IC) on the economy of Cameroon as part of the bilateral economic partnership agreement (EPA) with the European Union. As a result, the article shows that taking into account the trade liberalization in a situation of imperfect competition perspective will have amplified impacts on the economy. This result is supported by the implementation of a recursive dynamic computable general equilibrium model based on the 2016 social accounting matrix we built for Cameroon which reveals specifically that: growth losses estimated at 1381.10 billion of CFAF between 2016 and 2040 in perfect competition increase with the consideration of the IC up to 1474.13 billion of CFAF. The losses in customs revenue amount to more than 1008 billion of CFAF against 237.42 billion recorded in perfect competition. Hence, we recommend to the Cameroonian government to resign the agreement

Trade Liberalization and Macroeconomic Performance in Cameroon: An Imperfect Competition Approach

This article analyzes the impact of trade liberalization in a situation of imperfect competition (IC) on the economy of Cameroon as part of the bilateral economic partnership agreement (EPA) with the European Union. As a result, the article shows that taking into account the trade liberalization in a situation of imperfect competition perspective will have amplified impacts on the economy. This result is supported by the implementation of a recursive dynamic computable general equilibrium model based on the 2016 social accounting matrix we built for Cameroon which reveals specifically that: growth losses estimated at 1381.10 billion of CFAF between 2016 and 2040 in perfect competition increase with the consideration of the IC up to 1474.13 billion of CFAF. The losses in customs revenue amount to more than 1008 billion of CFAF against 237.42 billion recorded in perfect competition. Hence, we recommend to the Cameroonian government to resign the agreement

Vertical Integration in the Presence of Upstream Competition

We analyze vertical integration in the case of upstream competition and compare outcomes to the case where upstream assets are owned by a single agent (i.e., upstream monopoly). In so doing, we make two contributions to the modelling of strategic vertical integration. First, we base industry structure – namely, the ownership of assets – firmly within the property rights approach to firm boundaries. Second, we model the potential multilateral negotiations using a fully specified, non-cooperative bargaining model designed to easily compare outcomes achieved under upstream competition and monopoly. Given this, we demonstrate that vertical integration can alter the joint payoff of integrating parties in ex post bargaining; however, this bargaining effect is stronger for firms integrating under upstream competition than upstream monopoly. We also consider the potential for integration to internalize competitive externalities in a manner that cannot be achieved under non-integration; i.e., by favouring internal over external supply. We demonstrate that ex post monopolization is more likely to occur when there is an upstream monopoly than when there is upstream competition. Our general conclusion is that the simple intuition that the presence of upstream competition can mitigate and reduce the incentives for socially undesirable vertical integration is misplaced and, depending upon the strength of downstream competition (i.e., product differentiation), the opposite could easily be the case. Journal of Economic Literature Classification Number: L42vertical integration, foreclosure, monopolization, bargaining,competition.

FARM PRICE ESTIMATION WHEN THERE IS BARGAINING: THE CASE OF PROCESSED FRUIT AND VEGETABLES

Raw product prices for many processed fruits and vegetables are determined in part as an outcome of negotiations between processors and farmer bargaining associations. In such cases, unique market equilibrium solutions may not exist. This study develops a framework for price prediction under bargaining and applies it to the California cling peach industry. The price prediction equation turns out to involve the same variables as would a model specified for perfect competition. Hence a mistaken assumption about the structure of competition may still provide a model that predicts well, provided the structure remains constant.Demand and Price Analysis, Marketing,

A Strategic Model of European Gas Supply (GASMOD)

Structural changes in the European natural gas market such as liberalization, increasing demand, and growing import dependency have triggered new attempts to model this market accurately. This paper presents a model of the European natural gas supply, GASMOD, which is structured as a two-stagegame of successive natural gas exports to Europe (upstream market) and wholesale trade within Europe (downstream market), and which explicitly includes infrastructure capacities. We compare three possible market scenarios: Cournot competition on both markets, perfect competition on both markets, and perfect competition on the downstream with Cournot competition on the upstream market. We find that Cournot competition on both markets is the most realistic representation of today's European natural gas market, where suppliers at both stages generate a mark-up at the expense of the final customer (double marginalization). Our results yield a diversified supply portfolio with newly emerging (LNG) exporters gaining market shares. Enforcing perfect competition on the European downstream market would result in positive welfare effects. The limited infrastructure strongly influences the results, and we identify bottlenecks mainly for intra-European trade relations whereas transport capacity on the upstream market is sufficient (with the exception of Norwegian exports) in the Cournot scenario.Natural gas, Strategic behavior, Non-linear optimization, Europe

Vertical Integration in the Presence of Upstream Competition

We analyse vertical integration when there is upstream competition and compare outcomes to the case where upstream assets are owned by a single agent (i.e., upstream monopoly). In so doing, we make two contributions to the modelling of strategic vertical integration. First, we base industry structure – namely, the ownership of assets – firmly within the property rights approach to firm boundaries. Second, we model the potential multilateral negotiations using a fully specified non-cooperative bargaining model designed to easily compare outcomes achieved under upstream competition and monopoly. Given this, we demonstrate that vertical integration can alter the joint payoffs of integrating parties in ex post bargaining; however, this bargaining effect is stronger for firms integrating under upstream competition than upstream monopoly. We also consider the potential for integration to internalise competitive externalities in manner that cannot be achieved under non-integration. We demonstrate that ex post monopolization is more likely to occur when there is an upstream monopoly than when there is upstream competition. Our general conclusion is that the simple intuition that the presence of upstream competition can mitigate and reduce the incentives for socially undesirable vertical integration is misplaced and, depending upon the strength of downstream competition (i.e., product differentiation), the opposite could easily be the case.vertical integration, foreclosure

The classical notion of competition revisited

We compare and analyse two different conceptions of market competition: the walrasian notion of perfect competition and the Classical notion of free competition: while the former may be described as an equilibrium state in which atomistic agents treat prices parametrically, the latter is a situation in which agents, endowed by market power, fix prices strategically. We show that price undercutting or outbidding are the typical phenomena that, for the Classical authors, may be observed in a market characterized by free competition. We investigate some problematic aspects of the neoclassical notion of perfect competition and we reconstruct the Classical theory of free competition, as developed, in particular, by Adam Smith and Karl Marx, in the light of the modern notion of mixed strategies equilibria.Classical Economics, Competition, Adam Smith, Karl Marx, mixed strategies

PARAMETRIC AND NONPARAMETRIC MARKET POWER TESTS: AN EMPIRICAL INVESTIGATION

Parametric and nonparametric market power tests most commonly used to assess imperfectly competitive behavior are identified. Monte Carlo experiments are used to assess the accuracy of eight nonparametric tests. The results are compared to Raper, Love, and Shumway's (1997) findings concerning three parametric market power tests in the Bresnahan-Lau tradition. Both monopolistic and monopsonistic market power tests are implemented using data from 10 known market structures. Only two of the nonparametric market power tests distinguish between market structures adequately. The parametric tests perform well, although functional form bias is not investigated in this study.Industrial Organization, Marketing,