• Asia Marketing Journal
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• v.16 no.1
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• pp.35-69
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• 2014

The impact of competition on pricing has been studied in the context of counterfactual merger analyses where expected optimal prices in a hypothetical monopoly are compared with observed prices in an oligopolistic market. Such analyses would typically assume static decision making by consumers and firms and thus have been applied mostly to data obtained from consumer packed goods such as cereal and soft drinks. However such static modeling approach is not suitable when decision makers are forward looking. When it comes to the markets for durable products with indirect network effects, consumer purchase decisions and firm pricing decisions are inherently dynamic as they take into account future states when making purchase and pricing decisions. Researchers need to take into account the dynamic aspects of decision making both in the consumer side and in the supplier side for such markets. Firms in a two-sided market typically subsidize one side of the market to exploit the indirect network effect. Such pricing behaviors would be more prevalent in competitive markets where firms would try to win over the battle for standard. While such qualitative expectation on the relationship between pricing behaviors and competitive structures could be easily formed, little empirical studies have measured the extent to which the distinct pricing structure in two-sided markets depends on the competitive structure of the market. This paper develops an empirical model to measure the impact of competition on optimal pricing of durable products under indirect network effects. In order to measure the impact of exogenously determined competition among firms on pricing, we compare the equilibrium prices in the observed oligopoly market to those in a hypothetical monopoly market. In computing the equilibrium prices, we account for the forward looking behaviors of consumers and supplier. We first estimate a demand function that accounts for consumers' forward-looking behaviors and indirect network effects. And then, for the supply side, the pricing equation is obtained as an outcome of the Markov Perfect Nash Equilibrium in pricing. In doing so, we utilize numerical dynamic programming techniques. We apply our model to a data set obtained from the U.S. video game console market. The video game console market is considered a prototypical case of two-sided markets in which the platform typically subsidizes one side of market to expand the installed base anticipating larger revenues in the other side of market resulting from the expanded installed base. The data consist of monthly observations of price, hardware unit sales and the number of compatible software titles for Sony PlayStation and Nintendo 64 from September 1996 to August 2002. Sony PlayStation was released to the market a year before Nintendo 64 was launched. We compute the expected equilibrium price path for Nintendo 64 and Playstation for both oligopoly and for monopoly. Our analysis reveals that the price level differs significantly between two competition structures. The merged monopoly is expected to set prices higher by 14.8% for Sony PlayStation and 21.8% for Nintendo 64 on average than the independent firms in an oligopoly would do. And such removal of competition would result in a reduction in consumer value by 43.1%. Higher prices are expected for the hypothetical monopoly because the merged firm does not need to engage in the battle for industry standard. This result is attributed to the distinct property of a two-sided market that competing firms tend to set low prices particularly at the initial period to attract consumers at the introductory stage and to reinforce their own networks and eventually finally to dominate the market.

• Journal of Korea Port Economic Association
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• v.33 no.1
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• pp.89-110
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• 2017

The organization of the shipping conference -an international cartel, was approved by countries that recognized it for stabilizing routes as well as preventing excessive competition among liner shipping companies and recognized the characteristic of the liner service that is regularly repeated in the international liner shipping market. However, due to competition in bulk transportation and development of multimodal transport through new entrants, power expansion and vessel enlargement of non-aligned shipping companies; the shipping conference started collapsing, and was eventually abolished. As the shipping conference played an important role in the liner shipping market, there were changes in the competition structure of the liner shipping market, and this accordingly drove research on the effects of the abolition of the shipping conference on the liner shipping market. The effects of abolition of the shipping conference on the liner shipping market was analyzed after surveying the factors related to abolition of the shipping conference, and through the use of correlation and multiple regression analyses. Subsequent to the abolition of the shipping conference, the liner shipping companies increased global containership bottoms. Consequently, this led to fierce competition of freight charges. As a result, profitability of shipping companies diminished. However, shipping companies with a dominating cost structure recorded profits, while shipping companies with an inferior cost structure started recording a loss.

• Proceedings of the KSR Conference
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• 2010.06a
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• pp.1558-1566
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• 2010

After the establishment of 'Staggers' Rail Legislation' in 1980, which established an atmosphere of free competition in rail freight transportation market, freight railway in America became larger and the proportion of freight railway in the market increased. In 2008, it took up 43% of the transportation market based on tonne/mile unit and the productivity of freight rail increased. On the other hand, in the case of Korea, the competing atmosphere is being set up under the influences of the renovation of the rail transportation industry in 2004. However, to make the rail transportation market more active and become more advanced, a lot of efforts are required to build a stronger foundation of free competition atmosphere. In this paper, we have deducted the political implications on the establishment of strengthened competition in Korean rail transportation industry from reviewing what kind of changes the rail transportation market in America went through and how it was developed. In this case, we have focused on the changes in industrial trend towards the restriction policy. Also influences of the deregulation policy after 1980 on the enhanced market efficiency were reviews.

• Proceedings of the KIEE Conference
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• 2001.07a
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• pp.512-514
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• 2001

Recently, Korea's electric industry is in the midst of a period of profound changes in the structure and function, including the introduction of market competition in the generation sector. Korea is in the early stages of market competition, so the market price is chosen by generation costs but will be chosen by bids in future. Therefore, the profits of generators is determined by market pool price and the prospects of pool price are very important for new capacity investment determination of generators and IPPs. This study analyzes hourly marginal costs and LOLP considering basic generation mix and characteristics, develops the relationship of pool price using the above in competition market, and proposes basic direction for profits variation and supply-demand analysis in the electric market in future.

• The Journal of Fisheries Business Administration
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• v.40 no.1
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• pp.27-49
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• 2009

Recently, the Korea's economy concerns the second money crisis because of the rapid increase of the exchange rate. The Korea's economy which is very dependent on the foreign trade is more sensitive to the change of exchange rates. There are many literatures which analyze the effects of variations of the exchange rates on the secondary and tertiary industries such as the manufacturing industry and IT(Information Technology). But there have been no studies which try to figure out the effects of variations of exchange rate on the primary industries, especially, fisheries' industry. Therefore this paper tries to analyze the effect of price competition structure and the change of exchange rate on foreign fisheries exporting prices in Korea's fisheries import market. This study utilizes OLS(Ordinary Least Squares Analysis) for the analysis in the market of frozen yellow corvina, hairtail, angler fish which are major fisheries importable in Korea. The results show that the exporting country which has the highest market share is more sensitive to the change of the exchange rates itself than that of the other exporting countries' price when it starts to set up its exporting price. And the exporting countries which have low market share are more sensitive to the change of price which country has the highest market share than that of price whose countries have low market share and those of their exchange rate. Also we can find out that the countries which have similar market share try to set up price-setting strategy in the opposite direction. In other words, one country tries to bid up its price, other countries response to rival country by lowering their prices. In the consideration of the fact that most exporting countries aren't affected by Korea's fisheries' prices, the exporting countries in Korea's fisheries import market are more sensitive to the prices of other exporting countries than that of Korea's. This result indicates that the price leader-follower model could be applicable to the Korea's fisheries import market.

• Journal of Distribution Science
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• v.16 no.6
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• pp.55-63
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• 2018

Purpose - Our Research is a study on the competition structure between retailers in traditional markets. Specifically, this study examined the effects of SSM, commodity supply store, Hanaro mart, food mart and other mart in traditional markets on retail stores of small businesses. The purpose of this study is to provide a solution to the market encroachment of large retailers in traditional markets. Research design, data, and methodology - This study is based on the data of 'Market Survey of Traditional Market·Shopping Mall and Store Management in 2016' and 'Current status of SSM(Super SuperMarket), commodity supply store, Hanaro mart, food mart and other mart in the traditional market in 2017' conducted by Small Enterprise and Market Service. In this study, a multiple regression equation was constructed using the number of SSM, commodity supply store, Hanaro mart, food mart and other mart as an independent variable and sales, number of customers as a dependent variable for analysis. Results - The increase of SSM and commodity supply stores in the traditional market affects the sales decrease of the surrounding small merchants in the traditional market. This means that the SSM and commodity supply stores can lead to the decline of the traditional market. However, it has been found that the penetration of these companies in traditional markets does not affect the number of visitors. Second, Hanaro mart's entry into the traditional market has a negative impact on the sales and visitor numbers of the surrounding small-scale merchants. The increase in the number of food mart has a significant effect on the sales and the number of visitors to the small stores. The results of this study indicate that the food mart can contribute to the revitalization of traditional markets. Lastly, other mart with more than medium size were found to affect the sales of small stores, the number of visitors. Conclusions - We examines the competitive structure among retailers in traditional markets. The penetration of large retailers in traditional markets has a negative impact on traditional markets, particularly Hanaro mart has a greater impact than SSM. We provide practical and theoretical implications for the retail competition structure in traditional markets.

• Proceedings of the KIEE Conference
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• 2000.07a
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• pp.406-408
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• 2000

Recently, Korea's electric industry is in the midst of a period of profound changes in the structure and function, including the introduction of market competition in the generation sector. Therefore, it is difficult to promote long-term capacity planning and new generating capacity construction which have been driven by KEPCO so far, after the introduction of market competition, so new generating capacity construction and security of reserve margin is needed through self·regulation plan of private generation producers by market mechanism. According to the competition in the generation sector, a new paradigm is necessary to the long-term capacity planning driven by the Government. This paper analyzes the plan and the incentive level able to guide the new generation capacity construction considering the uncertainty risk in a period of introduction of competition. In addition, this paper analyzes the plan able to guide the new capacity construction by market function at the stage which market become established and Government's role to solve the anxiety about the capacity supply and demand.

• The Journal of Asian Finance, Economics and Business
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• v.6 no.4
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• pp.179-187
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• 2019

This study aims to investigate the effects of market commonality and resource similarity on price competition and the recursive consequences in the Korean lodging market. Price comparison among hotels in the same geographic market has been facilitated through the development of information technology, rendering little search cost of consumers. While the literature implies the heterogeneous price attack and response among hotels, a limited number of empirical researches focus on the asymmetric and recursive pattern in the competitive dynamics. This study empirically examines the price interactions in the Korean lodging market based on the theoretical framework of competitive price interactions and countervailing power. Demonstrating superiority to the spatial lag model and the ordinary least squares in the estimation, the results from spatial error model suggest that the hotels with longer operational history pose an asymmetric impact on the price of the newer hotels. The asymmetry is also found in chain hotels over the independent, further implying the possibility of predatory pricing. The findings of this study provide the evidence of a hierarchical structure in the price competition, with different countervailing power by the resources of the hotels. Theoretical and managerial implications are discussed, with suggestions for future study.

• International Area Studies Review
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• v.18 no.3
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• pp.231-248
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• 2014

The relationship between market structure and social welfare outcomes has received considerable critical attention in the field of competition policy research. In particular, it is necessary to study in greater depth the impact of market power on social welfare in the telecommunications industry, which is highly likely to form a monopolistic market structure. This is because, when market powers are concentrated on few upper carriers, there are negative effects on social welfare due to an excess of profits. Against this background, the present study investigates the relationship between the market structure of the mobile communications industry (the level of market power) and social welfare outcomes (the retail rate cut) through an international comparison. The results demonstrate that both the market structure and competition status of the Korean market have had significant gaps in global trends. It also points out that the monopolistic market structure (when the leading provider has more than 50% of the market share) has significantly negative effects on consumer welfare (the retail price cut). In addition, the findings of this study suggest that the direction of competition policy should focus on not only improving market concentration(HHI), but also on mitigating the monopoly of power of a dominant operator.

• Industry Promotion Research
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• v.5 no.4
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• pp.15-28
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• 2020

In this study, the methodology for measuring the structure of the Korean defense market and the competition status, and the characteristics of the Korean defense industry and the market are examined. To analyze the structure of the Korean defense market and the competition status, the market share, concentration ratio, and the Herfindal-Hirschman index are employed based on the annual sales of major Korean defense companies. On a basis of the result of the analysis, the suggestions for the Korean defense market to escape from the monopolistic market to be a competitive geographical market are presented. To present the suggestions, markets that have a similarity with the dense market are analyzed. The government's support policy, the selection of the companies led by the government, and the cost of the military are suggested for the defense market on a basis of analyzing similar markets. With the suggestions, when the government pursues the policies, the defense market sticking to principles and fairness is created and the efficiency of the companies operation is achieved, by enhancing the structure of the market fundamentally and the development of the policies in the industry's perspective.