ABSTRACT – Consider a setting where threatened rather than actual import competition restrains a domestic oligopoly´s prices. I show that not modeling the entry threat may underestimate the true degree of market power, as incumbents´s blunted price responses to demand shocks resemble perfectly-competitive behavior. Evidence from Brazilian cement markets points to an important role for imports in determining domestic cement prices, despite the near absence of imports. On assuming autarky, models with market power are rejected in favor of competition among incumbents. However, allowing a role for imports rejects the autarky assumption and precludes one from rejecting the presence of market power.
About The Author
Kellogg School of Management
setembro 11, 2015
WP002 – Do Public Banks Compete with Private Banks? Evidence from Concentrated Local Markets in Brazil
janeiro 1, 2010