Price Elasticities and Pricing Power in Emerging Markets: The Case of Petrochemicals Derived Plastics in South Africa
AbstractThis paper examines whether there necessarily exists a conflict between allocative and productive efficiency in small open economy markets. That productive efficiency favours market concentration is not in dispute, and the sole question we face is whether allocative efficiency suffers under high market concentration. We proceed theoretically and econometrically. We find that the conflict between productive and allocative efficiency is not necessarily as stringent as the international competition policy literature suggests should be the case. In particular, we note that the strategic interaction between the large domestic producer and its competitors makes feasible a range of alternative price elasticities of demand, and empirically that all price elasticities of demand are less than or equal to unity. Nevertheless the impact of market structure is such as to render feasible a wide range of possible levels of pricing power.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 78.
Date of creation: 2008
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Price elasticities; market power; emerging markets; South Africa;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
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