Planning and Market Structure

The Legal Life of the Areeda-Turner Test

While the construct of market is one of the basic concepts in Economics, the term competition became the elemental paradigm in apprehending the organisation of markets. For economic assessment, it is crucial to understand how markets are organized, how they function, and how firms operating within them behave. Economists remain interested in how different market structures and the concentration of sellers affect market prices and quantities. Long before the advent of neoclassical economics and its equilibrium in a perfectly competitive economy, Adam Smith advocated for competitive markets as the preferred market structure because they lead to socially optimal economic outcomes. This concept essentially encapsulates the entire theoretical background of microeconomics. There are numerous arguments for clarification of the EU competitions rules as some of them are pointed at improving market efficiency for the benefit of consumers while others are driven by purely political and/or competitiveness scrutiny. Hence, the goal of this study is to test perfect competition conditions and therefore the competitive dynamics among European countries, as to analyse the disparity between the theoretical positions and empirical reality. Evaluation is based on testing the equality of prices and marginal cost in the long run, as well as in the short run within a panel structured sample of 38 European countries for the period of 1960-2022. Various estimation methods indicated the absence of the equality between prices and marginal costs across the panel sample and different sub-samples, but with the presence of long term cointegration between these variables, indicating that these variables share a common long run trend.

In market economy, there are four types of markets: perfect competition, monopolistic competition, oligopoly, monopoly. The main differences among them are the ability to set price, barrier to enter and exit the market, numbers of companies. To study innovation’s efficiency in these markets, it is necessary to understand their special characteristics. To simplify the problem, when patent is employed, only the innovation company has the access to this new technology. When it does not exist, every company in the market can use the new technology. In perfect competition market, there are no barrier to enter or exit and lots of companies producing identical products, so no company can set the price. Because there is no barrier, companies that can earn profit will enter the market, which decreases the price. Eventually, all companies’ marginal cost, average cost and marginal benefit is equal to the price, average benefit. In other words, companies in perfect competition market earn zero economic profit. Social welfare is always maximum in this type of markets. In this case, when one company discovers new production technology, other companies will follow immediately. Lower cost causes higher supply, which makes the price decrease and equal to the average cost eventually, leaving every company having zero economic profit, including the first company discovered the new technology, so there is no incentive for any company to spend resource on innovation. However, consumers’ welfare would increase because of lower price. When patent is employed, one company can produce products in a lower price and earn certain economic profit, but can hardly make an influence on the market because there are too many suppliers. Thus, in perfect competition market, patent is a good way to provide incentives for innovations. In monopolistic competition market, there are lots of companies selling slightly different products. The difference among products enables one company to increase the price over in a limited range, so monopolistic competition market is inefficient. In this type of markets, there are two types of innovations: technology and product. The former one reduces the cost and has the same consequence as that in perfect competition market. The latter one, product innovation, makes the product more special, giving the company more market power. However, without patent, product innovation will be copied easily, making the original product less special and canceling out the market power gained by the original company. Since there is no economic benefit, there is no incentive for any company in the market to innovate. When patent is employed, products’ difference is kept and gives the company more market power since there is consumer preference in monopolistic competition market. This increase of market power is not as negligible as that in perfect competition market, so the market becomes less efficient when the company with patent increases the price. In oligopoly market, there are only a few companies with great market power, so all of them can set the price. In this market, companies make decision based on both output and price effects. Output effect means when price is higher than marginal cost, companies can increase profit by increase its output. Price effect means when a company increases its output, the market price goes down, causing less profit for the company. When output effect is more impactful than price effect, companies will increase sales. When price effect is more impactful than output effect, companies will decrease sales. Oligopoly market can be inefficient without restrictions. Regarding innovations, there is still no incentives without the presence of patents. With patent, innovation company will gain market power that is huge enough to cause inefficiency and even to force other companies to exit the market. Thus, patent in oligopoly market will cause negative impact on society, which should be limited. The last type of markets if monopoly. In monopoly market, there is only one company, so patent is necessary. When this company innovates and decreases its production cost, it will tend to increase its output to maximize profit, which enlarges consumers’ welfare. However, this increase is not as much as that in perfect competition market, so innovation in monopoly market is still inefficient.

In U.S. antitrust, pricing below some level of cost has become almost necessary to a finding of predatory pricing. The case law is ambiguous on this, and the Circuits have differing standards, but many courts require a showing that price is, or was, below marginal (sometimes called incremental) costs as a threshold issue. This necessitates using reasonable economic and accounting techniques to estimate marginal cost. A similar issue arises in the calculation of lost profits in much commercial litigation. In the case Marsann Co. v. Brammall, Inc, the Ninth Circuit interpreted the estimate of marginal cost in a narrow formalistic way that is inconsistent with ordinary cost accounting and economic analysis. That ruling, which was adopted by Inglis v. Continental Baking, makes a finding of predatory pricing almost impossible and provides incentives for would-be predators to structure their accounting systems to evade liability. The consequences of Marsann and Inglis are illustrated by Thales Avionics, Inc. v. Matsushita Avionics Systems Corporation where the Court’s application of Marsann and Inglis precluded plaintiff from establishing estimates of marginal cost and therefore the existence of predatory pricing.

Purpose: This study analyzes the impact of service-learning experience on learning satisfaction and employment preparation behavior of students enrolled in a haircut service-learning course.Methods: Participants included 46 students who were surveyed with 31 questions on general characteristics, haircut service-learning experience, learning satisfaction, and employment preparation behavior. The collected data were analyzed using the SPSS 25.0 statistical program.Results: According to the descriptive statistics analysis, the average score of haircut service-learning experience was 4.49, the average score of learning satisfaction was 4.43, and the average score of employment preparation behavior for each subfactor was 4.14 for “self-development activities” and 4.09 for “information gathering activities”. Correlation analysis results showed that haircut service-learning experience had a statistically significant positive (+) correlation with learning satisfaction (<i>p</i><0.001), and a statistically significant positive (+) correlation with self-development activities and information gathering activities as sub-factors of employment preparation behavior (<i>p</i><0.05). Furthermore, learning satisfaction was found to have a statistically significant positive (+) correlation with self-development activities and information gathering activities as subfactors of employment preparation behavior (<i>p</i> <0.05). The verification of the hypothesis showed that the higher the haircut service-learning experience, the higher the learning satisfaction, and the higher the self-development activities and information gathering activities, which are the subfactors of employment preparation behavior.Conclusion: It was confirmed that the higher the learning experience of a haircut service-learning course, the higher the learning satisfaction, and the higher the employment preparation behavior, and the higher the learning satisfaction, the higher the employment preparation behavior. Thus, it is necessary to develop and apply service-learning in various major areas.

Competition in the business and mass media industry globally began to be felt in Indonesia. This is evident in the structure of the mass media market in Indonesia, where media conglomeration has become commonplace. The industry and structure of the mass media in Indonesia has developed with many variants of mass media that can be consumed by audiences, whether they are conventional media types (old media) or internet based digital media (new media). The purpose of the research in this article is to find out the reality of industry and the structure of the mass media market in Indonesia. The research in this article uses qualitative research methods, precisely the descriptive-qualitative method, by focusing data from the literature review. The results of the research show that industrial conditions and the structure of the mass media market in Indonesia can be viewed from several perspectives, i.e. the number of media buyers and sellers, product differentiation, and barriers to competition. Meanwhile, to explore the structure of the mass media market in Indonesia, we can use The Theory of The Firm, which consists of four types of markets. The four types of markets are monopoly market, oligopoly market, monopolistic competition market, and perfect competition market. Media management from an art perspective can be used as a basis for the media industry; and globally, industry and the structure of the mass media market in Indonesia are not much different from other countries that adhere to the ideology of democracy in the world.

Impacts of subsidy regulation on the mobile market in Korea : Major provider’s diversification of handset quality

In this chapter, our goal is to examine the interplay between market structure and innovation. This is clearly a two-way relationship: on the one hand, firms' incentives to invest in R&D depend on the structure of the product market they are acting in (i.e., on the number of rival firms and on the way they compete); on the other hand, firms are likely to use R&D to shape the structure of their market (e.g., by using R&D to increase their market share or to keep potential competition at bay). As the two effects are complex and intertwined, we simplify the analysis by assuming that firms can somehow appropriate the return from their R&D investments (we analyse how they actually manage to do so in the next chapter). We also break down the analysis into separate issues.

Tuna Baskoy The Political Economy of European Union Competition Policy: A Case Study of the Telecommunications Industry, Routledge: London, 2008, 242 pp: 9780415965255 60 [pounds sterling] (hbk) There is a widespread consensus on the importance of competition policy. The mainstream political right sees it as a necessary means of ensuring a free market economy, while for the mainstream left it is a way of curbing monopoly and the concentration of corporate power in capitalism. All see competition as necessary to promote innovation and to enhance economic efficiency, prosperity and social welfare. Competition policy is perceived as necessary because 'perfect competition' is not encountered in the real world, and firms often behave in ways that are detrimental to competition. Competition policy has thus become the central pillar of modern micro-economic policy, conducted mainly by technocratic agencies and paralleling monetary policy as the central pillar of macroeconomic policy. Most developed industrial nations have independent competition agencies, and the European Commission has significant supranational powers in the area. This all suggests that competition policy and its implementation is and should be a matter mainly for technical specialists, a perspective that is intellectually rooted in liberal theory of market competition, and that underpins much of the literature on competition policy. This book seeks to undertake a critical analysis of these assumptions grounded in critical political economy and drawing on the development of competition policy in the EU telecommunications sector. Baskoy makes a compelling argument that most studies in the large body of literature on competition policy take the liberal model for granted, and do not critically analyse the nature of either market competition or competition policy. This consensus and the assumptions of the liberal model, Baskoy argues, have led to a European market in telecommunications that is not highly competitive, and that has favoured larger corporate interests at the expense of broader social and consumer welfare. At the heart of the book is a critique of the notion of 'workable' or 'effective' market competition that is put forward by many mainstream analysts of EU competition policy, and which informs the European Commission's policy making. The model of workable competition purports to overcome some of the problems of the liberal model, notably the static focus on market structure and the unobtainable ideal of perfect competition. Workable competition focuses more on the process of competition, and involves a recognition that it can flourish in oligopolistic structures and that the dynamics of markets mean that competition policy might have to be adjusted during short-run falls in profitability to ensure longer-term sustainable competition. Nevertheless, Baskoy argues that workable competition shares some of the key weaknesses of the liberal model--in particular its failure to conceptualise market competition in terms of varying economic, social and political power--and the underlying assumption that the state is an independent and omnipotent body. In order to address these policy and analytical problems, Baskoy argues for the adoption of a more credible model of market competition. Drawing on radical traditions in the analysis of markets, notably Thorstein Veblen, the book suggests the need for a model of 'dynamic market competition' in which market competition is conceptualised in terms of multiple political, economic and social forces, and competing values and ideas. This offers the hope of a better understanding of market competition by policy makers and the hope of better competition policy that might increase social welfare, rather than the welfare of those with economic power. …

This study is to examine the structural relationship between career barrier, career adaptability and career preparation behavior in the COVID-19 situation. During the survey period, a total of 290 students were asked to participate in the online survey, and the actual collected questionnaire was 284. The survey was conducted mainly on students majoring in aviation service students.BR The results of the study are as follows. first, career barrier which includes lack of self-clearance had negative influence on career adaptability. Second, career barrier had partial negative influence on career preparation behavior which includes tooling activities, information gathering activities. Third, career adaptability had positive influence on career preparation behavior which includes tooling activities, information gathering activities, practical efforts. Fourth, career adaptability was verified as effective on mediating between career barrier and career preparation behavior. What is noteworthy in the results of this study is that career adaptability acts as important variable between career barrier and career preparation behavior.

A substantial part of airports’ revenues relates to charges covering the costs of services supplied by the airport. Charges are imposed on carriers, which in turn pass them or a percentage of them, on to passengers. In the present chapter, special attention is given to regional airports characterized by low traffic volumes, enabling only one or a few carriers to serve each destination. A classic economic model is presented to analyze how the pass-on rate depends on supply and demand characteristics and market structure. Some illustrative examples assuming combinations of common specifications for market characteristics are also presented, showing pass-on rates ranging from 50% to more than 100%. Consequently, market structure and characteristics of carriers and passengers are decisive for how passengers experience changes in airport charges. The differences between the optimal charge from the perspectives of the airport and the welfare of society are specifically addressed. It is demonstrated that knowledge of the pass-on rate in the monopoly cases may be sufficient to infer how the mark-up will be affected by a change in marginal costs. Consequently, the understanding of the pass-on rate is relevant for airport owners and for decision-makers when considering the welfare of passengers and other politically stated goals.

This paper establishes a price leadership model which deals with various types of price leadership in a consistent manner, and reclassifies price leadership into three types from a theoretical point of view. Many economists, such as Forchheimer (1908), Nichol (1930), Stigler (1947b), Markham (1951), Lanzillotti (1957) and Bain (1960), have described various types of price leadership. These have been classified by Scherer (1970) into three types: dominant, collusive, and barometric price leadership. The dominant type' is considered to describe industries in which a dominant firm, which has the largest market share, solidly establishes the price leadership position with the other minor firms being followers. The collusive type (the monopolistic type of Stigler's barometric price leadership) is where some principal firms set prices which are followed by other minor firms, and so the price level is rather monopolistic than competitive. Scherer (1970, p. 170) has stated that price-leaders temper their price policies in order to suppress intra-industry conflicts in this case.2 Finally, in the barometric type (the competitive type of Stigler's barometric price leadership), the price is set around the competitive level.3 Bain (1960, p. 201) has characterized this type as the leadership-plus-price-concession pattern. However, their classification is based upon either market structure or conduct, and they have neither explained why the market structure is thus decided nor clarified why each firm chooses the present behaviour pattern, since they have not established a general price leadership model which can consistently deal with various types of price leadership. Therefore, the criteria for the traditional classification are rather ambiguous from a theoretical point of view. For example, though the dominant type is distinguished as that with the largest market share, the value of the critical share for a dominant firm to emerge is vaguely decided.4 One of the criteria that discriminates between collusive and barometric price leadership is whether the equilibrium price is monopolistic or competitive, but how can we determine the value of the critical price? In order to eliminate the ambiguity and deduce several types of price leadership theoretically from such fundamental conditions as the market demand, differences in marginal cost and in quality of products, we analyse here the relation between those conditions and each firm's optimal behaviour pattern. On the basis of this analysis, an investigation of the consequences of each firm's behaviour pattern leads us to adduce some theoretical basis for the various types of price leadership. The present paper describes, in Section I, a price leadership model in the case of homogeneous and heterogeneous goods, and develops several theorems that clarify why and when each firm prefers either the price leadership position or the followership position. Using these theorems, Section II reclassifies the price leadership theoretically into three types. Section III summarizes and concludes this paper.

This paper presents an optimization-based method to model the mid-term operation of a hydrothermal power system in a competitive market. Two market structures are examined: perfect competition and oligopoly comprising a dominant firm with a competitive fringe. In the latter, the dominant firm bidding strategy is determined by solving a profit maximization problem; forward contracts are also modeled. Producers submit offers to a day-ahead market, which is cleared by the system operator on a bid-cost minimization basis. A yearly planning horizon with hourly time intervals is adopted. A real size hydrothermal system, similar to the Greek Power System, is used for our tests. Hourly thermal unit commitment and start-up / shut-down decisions, market clearing prices, hydroplant generation / pumping and reservoir volumes, monthly price duration curves, ISO payment and thermal producer profits are among the results obtained.

The purpose of this study is to investigate securities firms’ market structure and contestability in Taiwan over the period from 1998 to 2006. This is the first study to integrate structural and non-structural approaches to the evaluation of competitive conditions in securities firms. The findings of this study have managerial implications, as the results show that market share is positively related to profitability but negatively related to efficiency, implying that the pursuit of market share may not be an appropriate strategy for securities firms. Empirical results show that securities firms are not in perfect competition and that the market is instead characterised by monopolist competition. The results regarding changes in the degree of competition show that securities firms’ competitive condition is not improving. The government is to advance a serial of financial reform policies, but they do not affect securities firms, so the market remains a monopolist competitive environment with a lower level of contestability.

This paper analyses the tests used by Antitrust Agency in Europe and United States, as the Areeda-Turner and Joskow-Klevorick rules, to assess a predatory pricing behaviour. We show that in utililities industries, in industries with network externalities, and in industries with products that are strongly complementary is not possible to prove a predatory pricing behaviour looking only the relationship between prices and the average and marginal costs. We need, as well, know the parameters of the demand curve of the interrelated markets. Therefore the conclusion of our paper is that the usual tests, as the Areeda-Turner and Joskow-Klevorick ones, could not be used as per se rules and that to prove predatory pricing in most cases we need an estimation of parameters of demand curves and documents that show the predatory intent.