کشش تأمین واردات کالاهای حیاتی و فرضیه های "واردات به عنوان انضباط بازار"
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|5243||2012||10 صفحه PDF||سفارش دهید||6287 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Economic Behavior & Organization, Volume 84, Issue 1, September 2012, Pages 345–354
This paper formally examines the factors underlying how responsive imports must be to domestic prices (the ‘import supply elasticity’) in order to thwart an anticompetitive domestic price increase stemming from a merger – an issue that frequently arises in many antitrust reviews. Domestic firms face a fringe comprised of foreign firms who import their products into the domestic market. In the eyes of domestic consumers, these imports are viewed as imperfect substitutes in demand to the output produced by the domestic firms. The model is solved in terms of the ‘critical’ import supply elasticity that can then be used evaluate the ability of imports to constrain an anticompetitive price increase post-merger. Numerical simulations are conducted to consider the magnitude of perturbations in the model's exogenous parameters. Potential empirical extensions of the model are also considered.
The influence that foreign imports may have on constraining the exercise of market power held by domestic firms – referred to as the ‘imports-as-market-discipline’ hypothesis – has interested industrial economists for some time.2 In recent years, the high industrial growth rates of several countries in Eastern Europe and the Far East have markedly increased the number of firms exporting into numerous domestic US markets, thereby potentially increasing the competitive pressure exerted by foreign suppliers even further. Accordingly, the presence and potential entry (or expansion) of foreign competitors in the domestic market may play an important role in the investigation by the antitrust authorities of proposed mergers between competing domestic firms. The question of whether foreign firms should be viewed as constraining price increases by domestic firms has been a central issue in recent, high-profile antitrust cases. For example, the US Department of Justice (DOJ), in its approval of the controversial merger between Whirlpool and Maytag in 2006, found that the transaction was unlikely to reduce competition substantially in part because “…newer brands such as LG and Samsung have quickly established themselves in recent years. LG, Samsung, and other foreign manufacturers could increase their imports into the U.S.”3 According to the DOJ, a sufficient quantity of household appliance sales in the US would be diverted to these foreign manufacturers in response to a post-merger price increase such that any incentive of a combined Whirlpool–Maytag to decrease its output would be defeated.4 This conclusion implies that LG, Samsung, and other foreign manufactures could defeat an anticompetitive price increase imposed post-merger by Whirlpool–Maytag.5 Some economists, however, have criticized the DOJ's findings. For example, Baker and Shapiro (2008) argue that the limited sales of foreign suppliers (as in the case of LG and Samsung) to date in mature markets where branding is important (such as the appliance industry) does little to quell concerns about the competitive effects of domestic mergers. From an antitrust analysis perspective, the question of whether the ‘imports-as-market-discipline” hypothesis holds hinges on whether the ‘import supply elasticity’ – which measures the responsiveness of foreign imports to changes in domestic prices – is sufficiently large to offset any post-merger exercise of market power by merging domestic firms. This is the issue we investigate analytically. The paper proceeds as follows. Section 2 presents the general theoretical model based upon the work of (Huveneers, 1981) in which domestic firms compete non-cooperatively in homogenous products à la Cournot and face a fringe of foreign firms who import into the domestic market. Imports are viewed in the eyes of domestic consumers as imperfect substitutes (i.e., to varying degrees) to the output produced by domestic firms. We analytically derive an expression for the equilibrium domestic industry-wide price–cost margin (Lerner index) and show how this mark-up relates to the import supply elasticity. We then consider how the components of this elasticity affect its magnitude.6 In Section 3 we examine a hypothetical merger in the context of the above model and an expression for the critical import supply elasticity – i.e., the minimum value of the elasticity that would prevent a hypothetical domestic monopolist from unilaterally imposing an anticompetitive price increase post-merger. We explore how the critical import supply elasticity affects the magnitude of a relative price increase resulting from a change in the domestic market structure toward increased concentration resulting from a merger. The expression for the critical import supply elasticity in turn provides a formal test for determining the impact of foreign competitors that can be applied by the antitrust enforcement agencies. We also discuss the key determinants of the critical import supply elasticity and consider the implications of perturbing these factors. Section 4 offers some numerical simulations of the model in order to further gauge the magnitude of the relationship between the critical import supply elasticity and key model parameters. Finally, Section 5 offers concluding remarks and discusses the application of the formal analysis considered here to future empirical work.
نتیجه گیری انگلیسی
Foreign imports may be an important competitive check on the exercise of market power by domestic firms. Whether this is the case depends on how willing domestic consumers are to substitute foreign products for domestic ones, which in turn endogenously determines the extent to which foreign firms will export products in response to a domestic price increase. In this paper we analytically derive an expression for this ‘critical import supply elasticity,’ which can be used to analyze the ability of foreign firms to constrain domestic price increases. Our analysis demonstrates how, in the general case, the critical import supply elasticity is related to the domestic market structure as well as changes to that market structure (such as from a merger, for example), the own-price elasticity of domestic output, the extent to which domestic consumers are willing to substitute between foreign- and domestic-produced goods, and the magnitude of a hypothetical price increase effectuated by a merger. The impact of changes in each of these factors on the magnitude of the import supply elasticity, which determine whether the ‘imports-as-market-discipline’ hypothesis will tend to hold, are also considered. Ultimately, implementing a competitive effects analysis requires some degree of empirical evidence (or at least casual observation to draw inferences). Our model highlights those data and estimation strategies that are likely to be required in order to appropriately conduct such an exercise when considering domestic markets facing the presence of foreign competition. Empirically determining the critical import supply elasticity requires obtaining estimates of the own-price elasticity of domestic demand and the other structural and behavioral parameters that define the expression. In addition, the inherent endogeneity underlying any structural model of import supply/demand will require the adoption of appropriate econometric techniques to separately identify demand and supply effects. However, to date relatively few empirical studies have attempted to estimate export supply elasticities while carefully addressing endogeneity issues. Goldstein and Kahn (1978) estimate both export demand and supply elasticities. Carey (1997) modifies the Goldstein & Kahn empirical framework to estimate import supply and demand elasticities via instrumental variables methods. Neither analysis, however, is concerned with conducting a competitive effects analysis through estimation of critical import supply elasticity as considered here. Extending the empirical methodologies used in these studies to estimate critical import supply elasticities should be a fruitful and useful endeavor for future empirical work and antitrust analyses of mergers involving foreign competition.