The paper observes the structure of regional commodity markets as a relation between competitive and monopoly regulating powers. A method for quantitative evaluation of competitiveness of certain markets depending on factors dominating in the region is proposed.Regional commodity market, boundaries of relevant market, concentration ratios, competitiveness factors., Research and Development/Tech Change/Emerging Technologies, R11, UDC: 332.142,

Krasavina, Raisa

English

Research Papers in Economics

Perspectives of Innovations, Economics & Business, Volume 5, Issue 2, 2010 
www.pieb.cz 
 
International Cross-Industry Journal  
79 
REGIONAL COURSE AND POLICIES 
DETERMINATION AND ASSESSMENT OF 
COMPETITIVENESS OF REGIONAL 
COMMODITY MARKETS 
 
  RAISA KRASAVINA, PH.D.  
 
Assistant Professor 
Nizhny Novgorod branch State University 
JEL Classifications: R11;  UDC: 332.142 
Key words: Regional commodity market, boundaries of relevant market, concentration ratios, competitiveness factors. 
Abstract:  The  paper  observes  the  structure  of  regional  commodity  markets  as  a  relation  between  competitive  and 
monopoly regulating powers. A method for quantitative evaluation of competitiveness of certain markets depending on 
factors dominating in the region is proposed. 
ISSN: 1804-0527 (online)  1804-0519 (print)    PP. 79-81 
 
Introduction 
A regional market is an elaborate, in terms of objects and 
subjects,  system  of  commodity  circulation  with  a  certain 
degree  of  territorial  location,  capacity  and  structure 
determined  by  a  specific  set  of  factors  of  economic  space 
formation.  
The  relevancy  of  this  definition  results  from  system 
features of regional markets: integrity, structure, cohesion and 
hierarchy (Gryaznova and Dumnaya, 2006). In turn, they are 
related  with  an  issue  of  setting  boundaries  of  a  regional 
market  which  constitutes  a  step-by-step  procedure: 
i) detection  of  connection  between  the  resource  and  the 
territory;  ii)  determination  of  the  degree  of  discrepancy 
between  potential  and  actual  boundaries  (relevant 
boundaries);  iii)  analysis  of  openness  of  the  market  and 
intensity  of  interregional  connections.  In  the  Russian 
Federation, where economic and institutional processes on a 
regional level are not   balanced due to significant spread of 
monopolistic activities, it is especially important for economic 
and managerial entities. 
Identification of competitiveness of regional                     
commodity markets: theoretical aspect 
Categorization  of  regional  markets  into  monopolistic, 
oligopolistic  and  deconcentrated  markets  results  from 
controversial  activities  of  monopolistic  and  competitive 
regulating powers. Consequently, certain types and kinds of 
regional commodity market structures are formed: “monopoly 
of  position”  (food  products);  infrastructural  monopoly 
(transport services); technological monopoly (communication 
services);  monopoly  of  local  governmental  authorities 
(housing  maintenance  and  utilities);  limited  oligopoly 
(manufacture  of  construction  materials);  oligopoly  with  a 
dominating  company  (preproduction  and  assembling  in 
machine  building);    “free”  (uncontrolled)  competition 
(agricultural  products);  “limited”  competition  (informational 
products).   
The  presented  multiplicity  of  the  structure  of  regional 
commodity  markets  may  have  both  negative  and  positive 
consequences for their functioning.  
The following shall be referred to negative consequences: 
-  circularity /“narrowness”/ of interregional connections; 
-  deformity of industrial and reproduction structure; 
-  narrow specialization of manufacturers; 
-  regional monopolism (“economic egoism”). 
   The  following  shall  be  referred  to  positive 
consequences: 
-  different-sized business entities; 
-  variety of organizational and pricing schemes; 
-  maintenance of competitive environment. 
Quantitative assessment of competitive environment                   
of the regional commodity market 
For  quantitative  assessment  of  the  competitive 
environment condition of regional commodity market, well-
known  microeconomic  indicators  are  used:  market 
concentration  ratio  (CR),  Lerner  Index  (L),  Herfindahl-
Hirschman Index (HHI). 
Each  of  the  indicators  has  its  specific  threshold  values 
obtained  by  analysis  of  business  experience  gained.  For  a 
regional market of consumer goods, the CR is recommended 
at the rate of no greater than 45%. For the production means 
market  it  should  be  up  to  70%  (Kovalenko,  2005). 
Concentration ratio has limitations in practical reliability due 
to the fact that it does not illustrate quantitative differences 
between  dominance  situations  and  equal  shares.  Owing  to 
this,  in  practical  application  it  is  important  to  perform  a 
numerical comparison of several concentration ratios at the 
same  time:  for  example,  three  (CR3)  and  four  (СR4)  of 
leading  companies.  The  Lerner  Index  describes  deforming 
influence  of  a  monopolist  on  a  regional  market  relating  to 
ineffective  allocation  of  resources.  Its  quantitative  value 
varies from 0 to 1.  Perspectives of Innovations, Economics & Business, Volume 5, Issue 2, 2010 
www.pieb.cz 
 
International Cross-Industry Journal  
80 
 
CHART 1. SYSTEM OF CRITERIA ON DEVELOPMENT OF REGIONAL COMMODITY MARKETS 
Factor  Indicators  Measurement  Use as a criterion of RCM development 
Resources  Natural conditions  Territory comfort level  By nature and degree of impact on people’s 
lives and business activities  
Natural resources  Location  Profitability of economic activities in 
comparison with other regions 
Reserves (balance/off-balance)  Possible “long life” of  competitive 
advantages 
Utilization potential  Development of prospective economic and 
business activities  
Demography  Consumers’ 
contingent 
(structural content) 
Allocation of residents by 
marketing research criteria 
Possibility of perspective analysis of volume, 
intensity and nature of consumers’ demand, 
methods and lines of need initiation  
Social environment 
(“quality of 
population”) 
Stratification on the bass of 
economic activity and political 
orientation 
Determination of population readiness and its 
strata to reformation and its rates 
Business  Profile 
(specialization) 
Industrial structure and its 
dynamics  
Finding prospective location in territorial 
labor division  
Primary specialization industries 
and their: 
А) percentage share in regional 
production; 
B) territorial concentration 
C) intensity of interregional 
exchange  
Evaluation of capability to effectively produce 
mass products  
Development of 
infrastructural 
industries 
Consideration of absolute 
numbers and ratios, inertia of 
functioning, functional 
substitutability of elements   
 
Analysis of capability to provide optimal 
conditions for production functioning and 
circulation of commodities, life activities of 
population; generating impulses of new 
exploration and integration of the economic 
space   
Cluster formation  Determination of nature of 
composition of industries and 
degree of their mutual attraction 
on the basis of vertical and 
horizontal interrelations between 
entities of different profiles by 
“demand chains” 
Change in quality of the economic situation 
and formation of competitive advantages by 
influencing competition dynamics, increasing 
production efficiency indicators, realization of 
synergy effect  
Institutional   Private property 
institution and level 
of its legal protection 
Practically efficient measures for 
support of proprietary rights and a 
number of successful cases for its 
legal defense   in courts of 
primary jurisdiction per year 
Possibilities to maintain practical business 
activity 
Correlation of 
companies of 
different types of 
ownership and legal 
organizational forms 
Determination of institutional 
structure of the production sector 
 
Determination of efficiency /expediency of 
functioning of certain business entities of 
these particular legal organizational forms   
“Transparency” of 
commodity 
circulation channels, 
informational and 
financial flows 
Existence and intensity of activity 
of informal organizational 
structures and schemes; number 
of violations of customs and tax 
laws per year   
Detection of existence of organized and non-
organized markets, their correlation and 
possibility of legalization of activities  
Small business 
development 
Parameters of a small form sector 
in the region: efficiency and 
productivity indicators  
Maintenance of an appropriate level of 
competition, possibility to occupy market 
niches, satisfaction of diversity of consumers’ 
demand  
Effectiveness of 
functioning of 
regional regulatory 
authorities  
Number of anti-monopoly claims 
reviewed 
Examination of subjectivity, strength and 
direction of deforming actions and influences 
Bureaucratic  
procedures 
Determination of “volume” and 
length 
Setting non-economic barriers for regional 
commodity markets, possibilities to reduce 
such barriers  Perspectives of Innovations, Economics & Business, Volume 5, Issue 2, 2010 
www.pieb.cz 
 
International Cross-Industry Journal  
81 
 
The  Herfindahl-Hirschman  Index  allows  overcoming 
disadvantages  of  concentration  ratios  and  captures  the 
difference between concentration levels on the markets with 
an equal number of companies. This discovers a dominating 
company in the market structure which makes the market less 
competitive.  Maximum  HHI  =  10 000  (in  case  of  “pure” 
monopoly). If HHI is greater than 1800, the market is deemed 
strongly monopolized. 
On regional markets in the Russian Federation, we observe 
a discrepant situation which, by its structure, is closed to the 
structure  of  a  monopolistic  type  with  the  relevant  actions 
relating to pricing and commodity circulation.  
The Nizhny Novgorod Administration of the Federal Anti-
Monopoly Service (NA FAS) annually carries out analysis of 
50  and  monitoring  of  300  commodity  markets.  Among 
highly-concentrated (by CR3 criterion) commodity markets of 
the Nizhny Novgorod region are: bread elevator market; car 
distribution  market  (taking  into  account  products  of  OJSC 
“GAZ”);  hydrocarbon  gas  market;  secondary  and  domestic 
waste  collection,  removal  and  burial  market.  Moderately 
concentrated commodity markets are: cellular communication, 
oil  products  distribution  -  wholesale  and  retail,  services 
markets  (outdoor  advertising,  television,  radio).  Among 
highly concentrated financial markets are: medical insurance, 
non-governmental  pension  funds,  mortgage  lending  and 
brokerage  services.  Moderately  concentrated  financial 
markets  are:  compulsory  civil  liability  motor-vehicle 
insurance (OSAGO) and consumer lending. Such state of the 
markets  illustrates  absence  of  economic  incentives  of 
monopolies for intensive business conducts and leads to price 
aggression (Business Portal, 2009).      
For  comparison,  let  us  consider  the  data  on  markets 
situation  in  Saint-Petersburg.  Markets  of  sausage  products, 
prefabricated meat products and canned meat products there 
can be deemed moderately concentrated (CR3 = 46 - 56,6); 
market  of  dairy  products  is  highly  concentrated  (CR3=73); 
retail  and  wholesale  pharmaceutical  markets  is  low 
concentrated (CR3= 15, HHI=180) and (CR3=44,4 , HHI = 
970)  respectively.  Moreover,  it  is  necessary  to  take  into 
account illegal monopolistic actions deforming actual market 
structure.  For  instance,  motor  fuel  market  is  formally  low 
concentrated  but  if  one  considers  commodity  distribution 
network above the retail level, it turns out to be an absolute 
monopoly  of  one  wholesale  supplier  which  is  noted  in  the 
FAS  claim  against  the  major  players  in  the  oil  products 
market (“Rosneft”, “LUKoil”, “Gazprom Oil”, TNK-BP).  
Conclusion 
As  a  result,  competitiveness  of  the  regional  commodity 
market  may  be  determined  as  readiness  to  respond 
(adequately  or  in  advance)  to  the  demand  of  different 
territorial localization. 
Competitiveness unites features of the “sets”: influencing 
factors; subjects; elements of the market mechanism. 
All of the above are “projected” to this territory but may 
be located and act beyond its borders. 
Therefore,  a  critical  price  situation  on  the  regional 
commodity  markets  refers  not  to  accidental  monopolistic 
actions  but  to  quite  regular  processes  of  opposition  to 
monopoly and competition when fixed ceilings of monopoly 
prices and profits may not be lowered by objective market 
transformations. 
References 
Competitive advantages as a precondition for regional development,  
http:// dvo.sut.ru /libr/history/i299mez2/7.htm 
 Development strategy for the Nizhny Novgorod region until 2020, 
www.government.nnov.ru 
Gryaznova, A., Dumnaya, N. (Eds.),  2006. Microeconomics. Theory 
and Russian practice: textbook, М.: KNORUS. 
Kovalenko,  E.,  2005.  Regional  economics  and  management: 
educational guidance, SPb.: Piter. 
Nizhny Novgorod region (special project), 2007. Expert Volga, No7, 
February.  
Porter, M., 2000. Competition: educational guidance, M.: Publishing 
house “Williams”. 
Porter,  M.,  2006.  Competitive  strategy:  Method  of  analysis  of 
industries and competitors,  M.: Alpina Business Book. 
State  of  competitive  environment  in  regional  markets  of  Saint-
Petersburg  and  demonopolization  program,    http://www.4p.ru/ 
main/research/4254/  
Yusupov,  K.,    2006.  Regional  economics:    educational  guidance,  
M.: KNORUS. 

Competitive advantages as a precondition for regional development, http:// dvo.sut.ru /libr/history/i299mez2/7.htm Development strategy for the Nizhny Novgorod region until 2020, www.government.nnov.ru

DETERMINATION AND ASSESSMENT OF COMPETITIVENESS OF REGIONAL COMMODITY MARKETS

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