Oligopoly and Other Imperfect Markets
This article investigates the competitiveness of the South African wheat industry and compares it to its major trade partners. Since 1997, the wheat-to-bread value chain has been characterised by concentration of ownership and regulation. This led to concerns that the local wheat market is losing international competitiveness. The competitive status of the wheat industry, and its sub-sectors, is determined through the estimation of the relative trade advantage (RTA). The results revealed declining competitiveness of local wheat producers.
This paper analyzes substitution between access to fixed-line and mobile telephony in the European Union. We estimate a structural model of household's demand for: (i) fixed-line only; (ii) mobile only; (iii) and both fixed-line and mobile access. We find that decreasing prices for mobile services increase the share of 'mobile only' households and decrease shares of 'fixed only' and 'fixed + mobile' households which suggests substitution between fixed-line and mobile connections.
The focus of this paper is on the presence of economies of scale in administering pension funds. We make use of a unique dataset with extensive information on South African retirement funds from 1996 to 2006. For almost fifty years now, South Africa has operated under a system with small social security bene ts but with considerable options and freedom to long-term savers. The dataset contains aggregate information for various fund types, fund classes, as well as different benefit structures.
This paper endogenizes both market transparency and product differentiation in a model of informative advertising á la Grossman and Shapiro (1984). We find, contrary to Schultz (2004), that an increase in market transparency raises firm profits but has no effect on product differentiation. We also find that a move from exogenous to endogenous market transparency is detrimental to welfare.
This paper attempts to isolate the conditions that give rise to loss leader pricing. I show that for sufficiently low distance between firms, the advertised good is priced below cost irrespective of whether firms advertise the same or different products. Instead, if products are sufficiently differentiated, loss leader pricing may result only if firms advertise the low reservation value product, otherwise the advertised good is a low margin leader.
We study how price advertising of a subset of products aspects equilibrium pricing and advertising under low and high product differentiation. We find that, when firms sell products with the same reservation price, loss-leader pricing obtains only when differentiation is low. However, when reservation prices differ, equilibrium may entail loss-leader pricing when differentiation is high.
I compare the outcome when firms semicollude on advertising to the outcome in the Grossman and Shapiro (1984) model of informative advertising. I show that advertising is lower but prices and profits are higher under semicollusion on advertising. I also show that semicollusion on advertising is detrimental to welfare. Although firms earn higher profits when colluding on advertising, fewer consumers are informed, and as a result, welfare is lower. Compared to semicollusion on price, semicollusion on advertising is not always less profitable.