Bar same market for lunch time but different in the

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Unformatted text preview: After-Markets (secondary markets) Cars Cars and spare parts; Washing machine and technical assistance technical Secondary market may be brand-specific If spare parts are a large fraction of overall If lifetime cost of product, consumers may consider this in choice at first market. consider Then monopolist in car market may not find it Then profitable to raise prices cars and spare parts should be considered as one market should 39 39 Geographic Market Also: SSNIP Test Consider: merger between mineral water Consider: producers in Italy producers Would hypothetical monopolist find it Would profitable to increase prices by 5-10%? profitable If yes: geographic market is Italy If no: as e.g. imports from France can be If expected, market is France and Italy expected, repeat test with FR and IT and so on. 40 40 Role of Imports Use Use shipment data to identify geographic market areas market low imports and low exports: separate low market market Problems: Problems: if if two regions trade a lot only with each other, there may be constraints among producers may Few shipments between A and B transportation Few cost may reduce trade. However, if prices in A would rise, B would start to export to A. would 41 41 Transportation cost relative relative importance of transportation cost in final price can be useful information in If low, shipments are realistic and markets If may not be separate although no trade is observed. observed. 42 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 Problem: to estimate (even with econometric techniques) to It can be shown that L = s/e, where „s“ is the firms It 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 Note from the Cournot model with N firms. from 43 43 Traditional Assessment Which threshold of market power? Look Look at market shares: the higher the more market power market Problem: 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.

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