Barriers to Retail Competition and Prices: Evidence From Spain
IMF Working Papers, October 1, 2006
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- Barriers to Retail Competition and Prices: Evidence From Spain
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Bibliographic details
- Authors: Willy A Hoffmaister
- Published: October 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451864915.001
Summary and research question
- Investigates why prices in Spain's regions fail to converge.
- Hypothesis: differences in regional barriers to entry in retail distribution explain persistent price dispersion.
- Develops a Cournot-Nash model of imperfect competition to illustrate how barriers affect prices.
- Uses a unique data set derived from an extensive analysis of competition policies in Spain to provide empirical evidence.
Theoretical framework
- Cournot-Nash model of imperfect competition is used to link barriers to entry with regional price outcomes.
- Model prediction highlighted: barriers to entry increase prices, but the effect is non-linear — barriers raise prices up to a point, indicating a threshold effect.
Empirical evidence and findings
- Empirical analysis based on the unique dataset shows that barriers to entry increase regional prices.
- Evidence suggests a threshold effect consistent with the model's predictions: barriers raise prices up to a point, beyond which the marginal impact on prices diminishes.
- Key subject areas covered: Competition, Consumer price indexes, Econometric analysis, Financial markets, Inflation, Prices, Threshold analysis.
Data and methodological notes
- Data set: derived from an extensive analysis of competition policies in Spain (unique dataset referenced in the paper).
- Methodological approach: combines theoretical Cournot-Nash modeling with panel and econometric analysis (keywords include panel cointegration, average cost, Threshold analysis).