Critical import supply elasticities and the ‘imports-as-market-discipline’ hypothesis
AbstractThis paper formally examines the factors underlying how responsive imports must be to domestic prices (the ‘import supply elasticity’) in order to thwart an anticompetitive domestic price increase stemming from a merger – an issue that frequently arises in many antitrust reviews. Domestic firms face a fringe comprised of foreign firms who import their products into the domestic market. In the eyes of domestic consumers, these imports are viewed as imperfect substitutes in demand to the output produced by the domestic firms. The model is solved in terms of the ‘critical’ import supply elasticity that can then be used evaluate the ability of imports to constrain an anticompetitive price increase post-merger. Numerical simulations are conducted to consider the magnitude of perturbations in the model's exogenous parameters. Potential empirical extensions of the model are also considered.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 84 (2012)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jebo
Competitive effects; Critical loss; Market definition; Import supply elasticity;
Find related papers by JEL classification:
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- F10 - International Economics - - Trade - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Turner, Philip P, 1980. "Import Competition and the Profitability of United Kingdom Manufacturing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 29(2), pages 155-66, December.
- Thompson, Aileen J., 2002. "Import competition and market power: Canadian evidence," The North American Journal of Economics and Finance, Elsevier, vol. 13(1), pages 40-55, May.
- Jacquemin, Alexis & de Ghellinck, Elisabeth & Huveneers, Christian, 1980. "Concentration and Profitability in a Small Open Economy," Journal of Industrial Economics, Wiley Blackwell, vol. 29(2), pages 131-44, December.
- John Kwoka, 1998. "Herfindahl Concentration with an Import Fringe and with Supply Constraints," Review of Industrial Organization, Springer, vol. 13(4), pages 401-407, August.
- Clark, Don P & Kaserman, David L & Mayo, John W, 1990. "Barriers to Trade and the Import Vulnerability of U.S. Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 433-47, June.
- Levinsohn, J., 1991.
"Testing the Imports-As-Market-Discipline Hypothesis,"
272, Research Seminar in International Economics, University of Michigan.
- Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
- James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
- Martha Field & Emilio Pagoulatos, 1998. "Foreign trade elasticities and import discipline," Applied Economics, Taylor and Francis Journals, vol. 30(1), pages 105-111.
- Catherine Carey, 1997. "U.S. Import Supply Behavior: Evidence from the 1980s," Eastern Economic Journal, Eastern Economic Association, vol. 23(2), pages 139-149, Spring.
- Bruce A. Blonigen & Wesley W. Wilson, 1999. "Explaining Armington: What Determines Substitutability Between Home and Foreign Goods?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 1-21, February.
- Pugel, Thomas A, 1980. "Foreign Trade and US Market Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 29(2), pages 119-29, December.
- de Ghellinck, Elisabeth & Geroski, Paul A & Jacquemin, Alexis, 1988. "Inter-industry Variations in the Effect of Trade on Industry Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 37(1), pages 1-19, September.
- Katics, Michelle M & Petersen, Bruce C, 1994. "The Effect of Rising Import Competition on Market Power: A Panel Data Study of U.S. Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 277-86, September.
- Goldstein, Morris & Khan, Mohsin S, 1978. "The Supply and Demand for Exports: A Simultaneous Approach," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 275-86, May.
- C. Huveneers, 1981. "Price Formation and the Scope for Oligopolistic Conduct in a Small Open Economy," Discussion Papers (REL - Recherches Economiques de Louvain) 1981032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- de Melo, Jaime & Urata, Shujiro, 1986. "The influence of increased foreign competition on industrial concentration and profitability," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 287-304, September.
- Ghosal, Vivek, 2002. "Potential foreign competition in US manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1461-1489, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.