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Barriers to Retail Competition and Prices: Evidence from Spain

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Author Info
Alexander W. Hoffmaister

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Abstract

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.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/231.

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Length: 41 pages
Date of creation: 20 Oct 2006
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Handle: RePEc:imf:imfwpa:06/231

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Keywords: Barriers to entry Cournot-Nash model regulation in goods markets and panel cointegration Competition Spain Markets Prices

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