George Norman

The Economics of Imperfect Competition: A Spatial Approach

List of figures and tables Preface 1. Introduction Part I. Nondiscriminatory Pricing: 2. A general theory of imperfect competition and nondiscriminatory pricing: the short run 3. A general theory of imperfect competition and nondiscriminatory pricing: the long run 4. Nondiscriminatory prices, economic development, and merger policies 5. Product differentiation: a spatial f.o.b. perspective Part II. Discriminatory Pricing: 6. Discriminatory pricing and alternative demand conditions 7. Alternative pricing policies 8. Discriminatory pricing and market overlap 9. Intraindustry trade: a spatial approach 10. Optimal pricing with delivered-price or transport constraints 11. International and intranational pricing with a general cost function: an introduction to optimal-control theory 12. Dynamic market strategy: further application of optimal-control theory 13. Heterogeneous prices and heterogeneous goods 14. Empirical findings on alternative pricing policies: demand and competitive impacts Part III. Pricing, Location, and Competition: 15. General location and market-area principles 16. Pricing, demand distribution, and location choice 17. Optimal location in nonspatial markets: a spatial approach 18. Competition, free entry, and long-run profit 19. An efficient long-run allocative equilibrium 20. Long-run locational equilibrium 21. Epilogue Notes Bibliography Author index Subject index.

The changing role of builders merchants in the construction supply chain

Builders merchants are an integral part of the construction industry, yet rarely are they consulted when discussions take place on the future of the construction industry. Throughout history, builders merchants have played a dominant role in the construction industry, initially as an intermediary between the artisan and the buyer, and more recently as a source of working capital for contracting firms. The merchanting industry currently is undergoing considerable change. The depressed construction market and the failure of the housing repair and maintenance sector to recover in the first half of the 1990s as activity in the private non-housing repair and maintenance sector has increased, has raised competition between merchants. The major building merchants are becoming larger by acquisition and merger, the smaller merchants are seeking niche areas, and the medium-size firms are under serious threat from acquisition by the larger merchanting firms. The trend towards consolidation in the sector, driven by the need to reduce costs, has meant that the large merchanting firms now control around 60% of the building materials market sales. Factoring is a growing trend, particularly with smaller companies sourcing goods from the cheapest source. The larger merchants have to respond by sourcing goods from the lowest cost base, irrespective of whether they buy from overseas markets. This paper analyses the UK builders merchants sector and evaluates the important role played in the supply chain.

The role of logistics in the materials flow control process

Frequently, the supply of building materials to the construction site is fraught with difficulties which can have a significant effect on productivity. Major productivity gains are possible, particularly if the building process is planned from a logistics perspective. The concept of logistics was developed initially within the manufacturing industry, and now constitutes an important management tool to ensure an overall strategic perspective on the flow of materials in the production process. This paper contends that logistics are relevant also to the construction industry, and describes the development of a logistics model to manage the flow of materials from suppliers to installation on-site and its application to a Danish house building project. The case study evidence suggests that the primary focus of the logistics concept in construction is to improve coordination and communication between project participants during the design and construction phases, particularly in the materials flow control process. The logistics concept requires accurate scheduling of materials to programmed delivery dates keyed to actual site layout and storage arrangements. The logistics approach also involves a new role for materials suppliers, including early involvement in the design phase and overall responsibility for the flow of information relating to materials.

The Location Choice of Offices of International Companies

There has been a structural shift of employment in developed countries towards the tertiary sector, and an increase in the proportion of economic activity being conducted by international firms. This paper is an examination of the factors that influence location choice of international offices, by means of survey data that facilitate a sectoral analysis of location choice. Analysis of the motives that lead to direct foreign operations is based on the ownership–location–internalisation paradigm, which suggests that international firms tend to be most active in those sectors in which their ownership advantages are most pronounced, and in which these advantages are best exploited internally to the firm. A branch–regional classification is used to distinguish cases in which office-location choice is dominated by external market forces (branch offices) and those in which location is determined by internal organisational forces. The primary influences on location choice are market size and the need for personal presence to serve this market. There is also clear evidence of a ‘bandwagon’ effect. But more detailed influences vary with office type and sector. In this respect, the quality and availability of resources are generally more important than direct costs. The United Kingdom emerges as a high-skill economy with a flexible labour force and good communications facilities. It is also the case that, although proximity to London remains important, there is a clear tendency to consider locations further from London, a tendency that will be further encouraged by technical change and improvement in domestic travel infrastructure.

Spatial Competition and Spatial Price Discrimination

The analysis of spatial competition under conditions of free entry, which derives its major impetus from the seminal work of Losch (1954), has been conducted, in general, on the assumption that the competitive firm will adopt an f.o.b. pricing scheme-see, for example, Capozza and van Order (1978), and Holahan (1978). Greenhut (1956) does consider some of the implications of discriminatory pricing within competitive markets, but his analysis adopts an essentially short-run view, and provides little rationale for the choice of such a pricing policy by competitive firms. This is in contrast with developments in the analysis of spatial monopoly. The early work of Singer (1937) and Hoover (1937) and subsequent developments by, for example, Greenhut (1956), Beckmann (1976), Beckmann and Ingene (1976), Greenhut and Greenhut (1977), Holahan (1975) and Norman (1977), indicate that the spatial monopolist should adopt a discriminatory spatial pricing policy (where spatial price discrimination is taken, conventionally, to mean that delivered prices do not follow an f.o.b. scheme, but that all concumers equidistant from a particular supplier pay the same price). It is rarely, however, that the results generated by the analysis of spatial monopoly are reconsidered in the analysis of spatial competition. In particular, although we know that spatial price discrimination will, in general, increase a monopolists profit, the assumption that profit maximising, spatially competitive, firms will adopt f.o.b. pricing schemes has rarely been questioned, and has not been questioned within the Loschian competitive framework; Greenhut and Ohta (1975a), Chapter 8 and Chapter 8, Appendix I, are notable exceptions, but in both cases they depart from the Loschian scheme. The first objective of this paper is, therefore, to show that, when Loschian competitive firms are allowed the option of discriminatory pricing, i.e. are free of institutional constraints which require f.o.b. pricing, they will be forced to exercise that option in order to maintain normal profits. Secondly, we shall show that, if competitive conditions change, the form of price discrimination will also change, and that under certain competitive conditions the degree of discrimination will increase with the degree of competition, leading eventually to uniform pricing. Thirdly, we compare two competitive cases with multi-plant monopoly and derive the spatial analogue of the conventional, spaceless, monopoly/perfect competition comparison. The monopolists plants will be larger, in area and total output, than each competitive firm, but will supply less per consumer at a higher average price. Welfare comparisons are less clear-cut, in that they are dependent upon the type of competition we assume. We show, however, that welfare maximisation requires marginal cost pricing, where marginal cost includes transport costs, and so requires f.o.b. pricing. If there are economies of scale to production it follows that welfare maximisation will require production subsidy.

Price Discrimination and Equilibrium in Monopolistic Competition

Modern theories of monopolistic competition have borrowed extensively from techniques developed in location theory and the theory of spatial pricing. A subject of concern is that there exists no free-entry price-location equilibrium. We demonstrate its existence, provided only that producers are allowed to price discriminate among consumers.

The theory of the multinational enterprise: an application to multinational office location

The forces that affect growth, location, and distribution in the service sector will have elements in common with those at work in manufacturing, but equally will exhibit certain unique features. This paper examines such forces in the specific context of location choices made by offices of multinational enterprises (MNEs). Such enterprises emerge in response to particular market imperfections and to exploit particular ‘ownership specific’ advantages. The nature of such ownership specific advantages is discussed with specific reference to MNE office location, and tested using data drawn from a survey of European offices of mainly US-based MNEs. It is shown that a distinction must be drawn between offices that provide a service for final consumption and those that provide a mainly coordinating role. The former types of office are shown to be heavily market oriented and to act in ways consistent with theory. The latter types of office are more complex, but again locate in ways consistent with theory; in particular they are influenced more by accessibility and by environment than by cost and geography.

Technology Choice and Market Structure: strategic aspects of flexible manufacturing

This paper shows that the adoption of flexible manufacturing techniques by firms leads to a tougher price regime. This need not benefit consumers since the tougher regime deters entry and facilitates segmented market structures. The ability of flexible manufacturing to deter entry is moderated by two forces: non-prohibitive costs of re-anchoring flexible manufacturing processes and entrants choosing to produce niche products using designated technologies rather than to adopt flexible manufacturing. If flexible manufacturing leads to market preemption it can be expected to be characterized by excessive product variety. Alternatively, flexible manufacturers may prefer to accommodate entry by small-scale, niche firms.

The accuracy and monitoring of quantity surveyors' price forecasting for building work

This paper examines the performance of two public sector quantity surveying departments when forecasting the lowest tender price for proposed projects at the design stage. The reliability of any price forecast is dependent upon professional skill and judgement and the availability of historical price data derived from completed projects. The quantity surveyor also requires an effective feedback mechanism that provides information on the accuracy of previous forecasts. A simple feedback mechanism is developed in this paper which can be used to assess forecasting performance and give an early warning of bias and identify any patterns that may emerge.

Sealed bid auctions: an application to the building industry

This paper examines some of the theory and practice of competitive tendering in the building iildustry. Allocation of building contracts by means of competitive tendering is one type of sealed bid auction. T\vo main strands of the theory of sealed bid auctions are developed. The first strarul identifies optimal mark-up given that each tender competition occurs in isolution. The second strand treats explicitly the sequential nature of tendering and resource constraints of tenderers. It emerges that the first strand is a special case of the second. A simple optimal bid price rule is identijed, which indicates that bid price for any one contractor will be affected by theresources availuble to the contractor and general market conditions. It is shown that bid prices will be more competitive the better the information available to tenderers, the more carefully is the tender list constructed and the greater the number of firms invited to tender. It is further shown, however, that little is gained by having more...