H. Peter Møllgaard

Market Domination: Tests Applied to the Danish Cement Industry

We propose an economic interpretation of the definition of a dominant position used by the European Court of Justice (ECJ). Then we apply co-integration techniques to test econometrically whether the sole Danish producer of cement holds a dominant position. Import penetration tests show that its conduct is independent of import price and quantity, so it can act to a considerable extent independently of its competitors. We also test whether it can act independently of its customers and find that its demand is inelastic with respect to its price. It thus holds a dominant position on the relevant Danish market.

Information Exchange, Market Transparency and Dynamic Oligopoly

Economic literature often offers conflicting views on the likely efficiency effects of information exchanges, communication between firms, and market transparency. On the one hand, it is argued that increased information dissemination improves firm planning to the benefit of society (including buyers) and allows potential buyers to make correct decisions given their preferences. On the other hand, economic literature also shows that increased information dissemination can raise prices through tacit or explicit collusion to the benefit of firms but at the expense of society at large. This chapter provides a general analytical framework to reconcile these views and presents some basic conclusions for antitrust practice. In addition, the chapter reviews cases from both sides of the Atlantic where informational issues have played a significant role.

Countervailing Power and Price Transparency

We investigate whether improved transparency about prices may increase the countervailing power exercised by buyers of an intermediate good. In a model with an informed manufacturer that sells to both informed and uninformed firms, we show that full transparency cannot be part of equilibrium due to the strategic effect of the resulting informational spillover. Transparency policies introduce a distortion for informed segments and are unsuccessful in completely removing the distortion from the uninformed segment. Welfare effects are hence ambiguous and depend on the weight assigned to uninformed markets. Our results thus cast further doubt on the value of transparency.

A Squeezer Round the Corner? Self-Regulation and Forward Markets

Squeezes are registered in the forward market for Brent crude oil. The squeezer accumulates forward contracts and creates artificial demand. This causes the price to surge and introduces uncertainty about the market outcome. Squeezes therefore render the market institution less palatable to other market participants. Producers may have a longterm interest in keeping market clearing smooth, e.g., by supplying stocks to squeezed traders. The extent to which such self-regulation should be carried out is analyzed in the context of a repeated game. Unless the probability of a squeeze is very small, self-regulation should be possible. Copyright 1997 by Royal Economic Society.

Asymmetric Adjustment in Menu Cost Duopoly

Contrary to existing menu cost models we assume oligopolistic interaction. Symmetric duopoly may lead to asymmetric adjustment even when menu costs are negligible: In some equilibria only one Orm adjusts to negative shocks, while both Orms adjust to positive shocks.