Barriers to Retail Competition and Prices: Evidence From Spain

October 1, 2006

Preview Citation

Format: Chicago

Willy A Hoffmaister. Barriers to Retail Competition and Prices: Evidence From Spain, (USA: International Monetary Fund, 2006) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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, Firms' output, Firm's problem, Incumbent firm, Inflation, Low-cost firm, Profit-maximizing firms result, Regulation in goods markets, Th firm, Threshold analysis, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/231
Stock No:

WPIEA2006231
ISBN:

9781451864915
ISSN:

1018-5941

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