To product market is bottled mineral water product 53

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Unformatted text preview: ue-to-weight 10% (plastic bottles) - 20% (glass bottles) for every 300 km 10% Little trade between EC countries (exception: imports Little into Belgium are high) into Entry in French market is difficult as mature market, Entry established brand names, lot of advertising would be needed needed HOWEVER: little trade is no good indication; right HOWEVER: question is whether imports would occur after price increases. increases. 54 54 Single Firm dominance Nestlé owns Vittel and Hépar Perrier owns Perrier, Contrex, Volvic, St. Yorre, Thonon, Perrier and Vichy, as well as several local spring water brands and BSN (competitor) owns Evian and Badoit Three firms hold 82.3% of market in terms of value and Three 76% in volume. 76% Estimates at firm level: BSN 25%, Nestlé 20-25%, Volvic Estimates 7% and other Perrier brands 20-25% 7% Merger would result in single firm holding 45-55%, Merger largest rival 25%. largest That would be enough to start analysis of single firm dominance IF merged firm would sell Volvic to competitor, BSN IF would have 30% of market. Volvic also had largest capacities in the industry single firm dominance argument much weaker: Nestlé/Perrier single could not behave independently from BSN. could 55 55 Single Firm dominance Would merger be likely to raise prices? Market 3 is highly concentrated producers have more than 80% of market. Neven Neven et al. (1993) estimate the lower bound of HHI after merger at 2660, and change in HHI of 1000. Compare Compare to US merger guidelines: very high values!!! values!!! 56 56 Single Firm dominance Supply No substitution or potential entry? important or actual competitors Is it true today still? Coca Cola‘s Dasani? local local producers fragmented; none of these has financial power to start large advertising campaign (sunk cost!) (sunk Note: Note: Even if market size increases, one should expect persistence of high concentration due to high sunk cost. persistence Entry barriers large due to regulation It It was assumed that entry with purified tap water can never be successful. be 57 57 Single Fi...
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