A revised theory of contestable markets : applied on the German telecommunication sector
Christian Growitsch, Thomas Wein
Externe Publikationen,
Nr. 275,
2002
Abstract
Despite the scepticism raised by the German Monopoly Commission our analysis shows that the revised theory of contestable markets can be applied to the telecommunications market better than expected. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit is possible without any costs, and the price adjustment lag exceeds the entry lag. Our analysis shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions are satisfied for potential competition to exist. We applied the ‘revised’ contestable market theory to the German telecommunication market and have been able to clearly identify the value added stages in which regulation is required. Under the present conditions local loops - which can be determined as natural monopolies - are not contestable due to sunk costs, high entry lags expected and a probable short price adjustment lag. Local loops can be identified as monopolistic bottlenecks therefore. Regional and local connection networks should also be regulated because a high entry lag and a low price adjustment lag have to be expected as well as current competition does not exist today. The national connection network shows current competition between several network providers; hence regulation can be abolished in this field. Assumed that network access is regulated, services can be supplied by several competing firms.
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Bank Concentration and Retail Interest Rates
S. Corvoisier, Reint E. Gropp
Journal of Banking and Finance,
Nr. 11,
2002
Abstract
The recent wave of mergers in the euro area raises the question whether the increase in concentration has offset the increase in competition in European banking through deregulation. We test this question by estimating a simple Cournot model of bank pricing. We construct country and product specific measures of bank concentration and find that for loans and demand deposits increasing concentration may have resulted in less competitive pricing by banks, whereas for savings and time deposits, the model is rejected, suggesting increases in contestability and/or efficiency in these markets. Finally, the paper discusses some implications for tests of the effect of concentration on monetary policy transmission.
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FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint E. Gropp, Kristina Kostial
Finance & Development,
Nr. 2,
2001
Abstract
OECD countries with high corporate tax rates have experienced both high net outflows of foreign direct investment and a decline in corporate tax revenue. Identification of a causal link between these two trends has implications for the debate on tax harmonization versus tax competition.
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FDI and Corporate Tax Revenue: Tax Harmonization or Competition?
Reint E. Gropp, Kristina Kostial
Finance & Development,
Nr. 2,
2001
Abstract
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Price Competition between an Expert and a Non-Expert
Jan Bouckaert, Hans Degryse
International Journal of Industrial Organization,
Nr. 6,
2000
Abstract
This paper characterizes price competition between an expert and a non-expert. In contrast with the expert, the non-expert's repair technology is not always successful. Consumers visit the expert after experiencing an unsuccessful match at the non-expert. This re-entry affects the behavior of both sellers. For low enough probability of successful repair at the non-expert, all consumers first visit the non-expert, and a 'timid-pricing' equilibrium results. If the non-expert's repair technology performs well enough, it pays for some consumers to disregard the non-expert a visit. They directly go to the expert's shop, and an 'aggressive-pricing' equilibrium pops up. For intermediate values of the non-expert's successful repair a 'mixed-pricing' equilibrium emerges where the expert randomizes over the monopoly price and some lower price.
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Spillover Effects and R&D-Cooperations - The Influence of Market Structure
Anita Wölfl
IWH Discussion Papers,
Nr. 122,
2000
Abstract
This paper examines empirically the role of market structure for the influence of spill-over effects on R&D-cooperations. The results of a microeconometric analysis, based on firm data on innovation, let in general presume that with intensified competition also the influence of spillovers on R&D-cooperation increases. However, competition seems to induce firms to search for effective firm-specific appropriation facilities first. Spillovers that are sufficiently high such that the internalisation effect from R&D-cooperation more than outweighs the competitive effect from research, only arise whenever firms are not able to protect their research results through any appropriation facility. Additionally, there is some evidence that spillover effects may even hinder firms from cooperating in R&D when there is intensive competition on the research stage.
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The Total Cost of Trading Belgian Shares: Brussels versus London
Hans Degryse
Journal of Banking and Finance,
Nr. 9,
1999
Abstract
Since 1990, London’s SEAQ International (SEAQ-I) has attracted considerable trading volume in Belgian equities. This paper investigates competition between the Brussels CATS market and London’s SEAQ-I. Toward this end, we gathered extensive limit order book data as well as transactions and quotation information. With regard to liquidity (indirect costs), measured by the quoted and effective bid–ask spread, the paper concludes that CATS outperforms SEAQ International for both measures. The effective spread is of course substantially smaller than the quoted spread, with the CATS effective spread showing a U-shaped form. This paper, unique in employing an extensive data set that includes all hidden orders and the whole limit order book, produces results in line with the different market microstructure models. Total trading costs on CATS are lower (higher) for small (large) trade sizes.
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Revenue Implications of Trade Liberalization
L. Ebrill, Reint E. Gropp, J. Stotsky
IMF Occasional Papers, No. 180,
Nr. 180,
1999
Abstract
In recent decades many countries have dismantled trade barriers and opened their economies to international competition. Trade liberalization is seen to promote economic efficiency, international competitiveness, and an expansion of trade, perhaps especially in imperfectly competitive markets. Yet despite this progress in trade liberalization, as evidenced by the conclusion of the Uruguay Round in 1994 and the establishment of the World Trade Organization (WTO) in 1995, trade barriers are still widespread. Some economies and some sectors (e.g., agriculture in many industrial countries) remain relatively insulated from the global economy by a variety of nontariff and tariff barriers, even as import substitution continues to lose ground as a strategy for economic development.
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Phonebanking
Jan Bouckaert, Hans Degryse
European Economic Review,
Nr. 2,
1995
Abstract
In a two-stage game, we study under what conditions banks offer phonebanking (first stage). In the second stage, they are competitors in the market for deposits. Offering the phone option creates two opposing effects. The first is a demand effect as depositors strictly prefer to manage some of their financial transactions by phone. The second (strategic) effect is that competition is increased as transaction costs are lowered. Universal phonebanking prevails when the demand effect dominates the strategic effect. Specialization can occur in that one bank offers the phone option while the other does not.
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