This paper studies competition in small, concentrated and inter- related markets. Our data set consists of price information fron 543 driving schools in 250 local markets in sweden, which gives a large sample to test hypotheses on how market structure influences competition. The results show that if prices in nearby markets are low, and the distances to them are short, it reduces prices, as suggested in models of spatial competition. Moreover, we find that prices in closely located markets are interdependent. It is also shown that prices are increasing in firm concentration within a market, as most theories of oligopoly predict.
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Length: 27 pages Date of creation: Nov 1995 Date of revision: Publication status: Published in International Journal of Industrial Organization, 1999, pages 353-369. Handle: RePEc:hhs:hastef:0084
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Find related papers by JEL classification: C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services R32 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Other Production and Pricing Analysis
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