Barriers to Retail Competition and Prices: Evidence From Spain
October 1, 2006
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Summary
Why do prices in Spain's regions fail to converge? The prime suspects for this puzzling result are differences in regional barriers to entry in retail distribution. This paper develops a Cournot-Nash model of imperfect competition to illustrate the effect of barriers on prices. A unique data set-derived from an extensive analysis of competition policies in Spain- provides evidence that barriers to entry increase regional prices. The evidence also suggests that, consistent with the model's predictions, barriers to entry raise prices up to a point, and thus indicate that barriers have a threshold effect on prices.
Subject: Competition, Consumer price indexes, Econometric analysis, Financial markets, Inflation, Prices, Threshold analysis
Keywords: and panel cointegration, average cost, Barriers to entry, Competition, Consumer price indexes, Cournot-Nash model, Europe, firm type, firm's problem, firms' output, incumbent firm, Inflation, low-cost firm, profit-maximizing firms result, regulation in goods markets, th firm, Threshold analysis, WP
Pages:
41
Volume:
2006
DOI:
Issue:
231
Series:
Working Paper No. 2006/231
Stock No:
WPIEA2006231
ISBN:
9781451864915
ISSN:
1018-5941
