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Unformatted text preview: After-Markets (secondary markets) Cars
Cars and spare parts; Washing machine and
technical Secondary market may be brand-specific If spare parts are a large fraction of overall
lifetime cost of product, consumers may
consider this in choice at first market.
consider Then monopolist in car market may not find it
profitable to raise prices cars and spare parts
should be considered as one market
39 Geographic Market Also: SSNIP Test Consider: merger between mineral water
producers in Italy
producers Would hypothetical monopolist find it
profitable to increase prices by 5-10%?
profitable If yes: geographic market is Italy If no: as e.g. imports from France can be
expected, market is France and Italy
expected, repeat test with FR and IT and so on.
40 Role of Imports Use
Use shipment data to identify geographic
market low imports and low exports: separate
if two regions trade a lot only with each other, there
may be constraints among producers
Few shipments between A and B transportation
cost may reduce trade. However, if prices in A
would rise, B would start to export to A.
41 Transportation cost relative
relative importance of transportation cost
in final price can be useful information
in If low, shipments are realistic and markets
may not be separate although no trade is
42 Assessing Market Power Which measure of market power? Theory: Lerner index
ratio of price and marginal cost: L=(p-c‘)/p
Index increases with mark-up of firms Problem: marginal cost are not observed, and difficult
to estimate (even with econometric techniques)
to It can be shown that L = s/e, where „s“ is the firms
market share and „e“ the elasticity of demand
market „e“ can be estimated with econometric techniques Note that „L = (p-c‘)/p = s/e“ is the equilibrium result
from the Cournot model with N firms.
43 Traditional Assessment Which threshold of market power? Look
Look at market shares: the higher the more
Problem: Not suff...
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This note was uploaded on 01/22/2014 for the course ECON D0T32A taught by Professor Czarnitzkidirk during the Spring '13 term at Katholieke Universiteit Leuven.
- Spring '13