Now showing 1 - 10 of 16
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Publication

Merger control in differentiated product industries

2006, Whelan, Ciara, Walsh, Patrick P., Mariuzzo, Franco

Given that brands (products) are location specific in terms of coverage of retail stores, we allow consumers to have preferences over location and products to carry distribution costs, alongside preferences and costs over other observable and unobservable product characteristics. We embed these considerations into Berry, Levinsohn and Pakes (1995) to jointly estimate demand and cost parameters for brands (products) in Retail Carbonated Soft Drinks. Allowing for location has a very significant impact on estimated primitives and the predictive power of the structural model. As a counterfactual exercise we show the effects on welfare of an equilibrium that results from a change in the distribution of consumer taste for location.

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Merger control in differentiated product industries

2005-05, Mariuzzo, Franco, Walsh, Patrick P., Whelan, Ciara

Thresholds defined on the level and change in the HHI (Herfindahl-Hirschmann Index) applied to market shares seem to be the main instrument to select notified mergers for investigation in both the EU and US. We question the use of such a selection rule in differentiated products industries. We propose the use of a structural approach to apply HHI thresholds based on profit shares rather than market shares. We illustrate our point using product data for Retail Carbonated Soft Drinks (Price, Market Share and Characteristics). We estimate company (product) mark-ups consistent with a structural model of equilibrium, using demand primitives from a Nested Logit model and a Random Coefficient model. We provide an example where the HHI thresholds based on profit shares identify potentially damaging mergers not captured by applying thresholds to output shares, or conversely, identify mergers of no concern that would be selected on the basis of output shares.

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Product differentiation and firm size distribution : an application to carbonated soft drinks

2001-06, Walsh, Patrick P., Whelan, Ciara

Using brand level retail data, the firm size distribution in Carbonated Soft Drinks is shown to be an outcome of the degree to which firms have placed brands effectively (store coverage) across vertical (flavour, packaging, diet attributes) segments of the market. Regularity in the firm size distribution is not disturbed by the nature of short-run brand competition (turbulence in brand market shares) within segments. Remarkably, product differentiation resulting from firms acquiring various portfolios of product attributes and stores in market evolution determines the limiting firm size distribution.

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The importance of structural change in industry for growth

2000, Whelan, Ciara, Walsh, Patrick P.

The paper documents ongoing job creation and job destruction within 3- digit Irish manufacturing sectors over the period 1973 to 1994. Within sectors of low-technology manufacturing, this was due to the gradual development of historical export product lines and gradual decline in historical domestic oriented production. In contrast, the structural change in jobs within sectors of hightechnology manufacturing resulted from the gradual accumulation of foreign capital with new export product lines and a phasing out of inefficient import substituting industry. Ireland’s industrial performance is shown to be an outcome of such path dependent structural change.

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Firm performance and the political economy of corporate governance : survey evidence for Bulgaria, Hungary, Slovakia and Slovenia

2000-07, Whelan, Ciara, Walsh, Patrick P.

Using survey data for 220 traditional manufacturing firms over 7 years of transition and 4 CEE countries, we find firms that produced for the EU market under planning consistently outperform those that produced for the CMEA market. Within the previously CMEA market, the best firms were selected to outside privatisation and outperformed insider/state owned firms. Outside privatisation was resisted in EU oriented firms and ownership was found to have no effect on performance. We argue that insider/state ownership in previously CMEA and EU markets builds up political support for the market system during its initial stages, ensuring its long-term success.

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Coverage of retail stores and discrete choice models of demand : estimating price elasticities and welfare effects

2010-01, Mariuzzo, Franco, Walsh, Patrick P., Whelan, Ciara

Consumers' choice set of products within stores can be limited. Ackerberg and Rysman (2005) address this problem by modeling unobserved consumer preferences over products and retail stores, leading to augmented demand specifications. Having Carbonated Soft Drink product level data, where we observe products' store coverage, we are able to estimate their logit, nested logit and random coefficient logit specifications of demand in a structural model of equilibrium. Allowing for store coverage turns out to have a very significant impact on the estimated structural parameters and on the predictive power of the model. Taking these estimated structural parameters we perform a counterfactual whereby stores carry all products in the market. We find systematic increases in price elasticities and welfare in our new equilibrium. Competition in markets is more curtailed than normally assumed in structural models of industries.

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Portfolio effects and firm size distribution : carbonated soft drinks

2002, Whelan, Ciara, Walsh, Patrick P.

We use rich brand level retail data to demonstrate that the firm size distribution in Carbonated Soft Drinks is mainly an outcome of the degree to which firms own a portfolio of brands across segments of the market, and not from performance within segments. In addition, while the number of firms in each segment is limited by segment size relative to sunk cost and competition in a segment, idiosyncratic firm effects make some firms more likely to participate in any given segment. This feature of the industry is the key to modelling firm size distribution in Carbonated Soft Drinks.

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Product characteristics and the growth of FDI

2002-07, Barry, Frank, Hannan, Aoife, Whelan, Ciara

FDI and the activities of foreign affiliate firms have grown dramatically in recent decades, both in absolute terms and as a share of world GDP. Most explanations of this phenomenon focus on the impact of the macroeconomic environment on the choices facing individual firms over whether or not to engage in FDI. We focus instead on the characteristics of demand for the products produced in sectors known to be conducive to FDI. These characteristics are shown to help explain the recent growth in the FDI-to-GDP ratio.

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Price dispersion and strategic outcomes : an analysis of the Irish independent grocery sector

1997, Walsh, Patrick P., Whelan, Ciara

This paper empirically analyses price dispersion between brand within product catgories in the Independent grocery sector. The methodology adopted allows us to discriminate between the impact which various structural demand and supply side features have on price dispersion in both traditional and game-theoretic frameworks. Specifically we estimate how differences in the product cycle, sales structure, distribution structure, and downstream retailer power impact patterns of price dispersion while controlling for idiosyncratic product effects. Our results suggest that competitive pricing of brands in product categories, and hence price dispersion, will rise with a slump in the product cycle, fragmentation in the sales structure, greater distribution coverage in outlets, and factors which restrict downstream retailer power.

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A rationale for repealing the 1987 Groceries Order

1999, Whelan, Ciara, Walsh, Patrick P.

A ban on pricing below cost was implemented under the 1987 Groceries Order based on the premise that loss leading used in multi-product retail pricing distorts competition and exploits consumers in the short run, while driving a more concentrated structure and reducing welfare in the long run. Loss leading is examined for multi-product retailers selling in imperfectly competitive market niches with imperfect consumer information. We develop a theoretical argument in a simple two-stage framework that illustrates how loss leading on a subset of products is an equilibrium outcome of price competition that leaves overall welfare equal to that observed under laissez faire.