The theory of industry markets features the formation of Russian firms. The theory of industrial markets as a science. Monopoly power of a firm

TOPIC 1. Basic concepts and categories

Economics of industrial markets

1. Object and subject of research into the theory of industrial markets. General concepts industrial market theories

3. Degree and directions of competition

4. Industries and sectors of the economy: modern tendencies

Object and subject of research of the theory of industrial markets

Modern period economic development requires clarification of the content of some different concepts (terms), which, in essence, refer to the same objects. Thus, traditionally the concept of “industry organization” is considered as a synonym for “industrial economics”, “theory of industrial organization”, “theory of industrial organization”, “theory of industrial markets”.

Main object The theory of industrial markets is the study of the mechanism that brings production activity into the fullest possible correspondence with the demand for goods and services.

Any economic system must answer the following fundamental questions:

What products to produce and in what quantity;

How to use society's limited resources to produce each product;

How final products must be distributed among various members of society.

The theory of industrial markets should answer similar questions.

Item The theory of industrial markets is associated with the market approach, according to which consumers and producers act on the basis of price signals generated by supply and demand. The theory of industrial markets focuses on the state of the extractive and manufacturing industries that create material basis life of society in industrialized economic systems.

The economics of industrial markets can be viewed in two aspects:

As a field of theory that includes the concepts and analytical methods of market research;

As a lot of facts and information about the real state of the markets and the position of the company in the markets.

Information about the state of affairs of a company in the market makes it possible to judge many processes occurring in the market, including those that are hidden from direct observation. Thus, monopolies are able to achieve enormous power, but are not always able to maintain it.

General trends in the behavior of firms are that:

- firms strive to capture the largest market share (market power) to obtain maximum profits;

- several firms strive to mutually control each other, ensuring effective competition; it curbs price increases and encourages efficiency and innovation;

Firms that have captured the largest market share can receive high profits and establish monopoly restrictions (prices, output volumes), causing large costs to society (inefficient production, slowdown in innovation, unfair distribution of income, etc.);

The costs of monopoly can be offset by greater scale of production or by the efficient operation of dominant firms.

Main factors of the theory of industrial markets. First of all, this is the degree of monopolization. This concept is relative and can be characterized in a simplified form by the demand for the company’s product (Fig. 1).

Figure 1 – Demand curves: 1 – for a monopolist; 2 - weak monopoly; 3 – effective competition

A monopolist can sell a significant amount of goods at fairly high prices, i.e. the price fluctuates widely, demand is inelastic (curve 1). For a weak monopoly (curve 2) it is much flatter, and it is significantly lower than for monopoly demand. And finally, curve 3 is almost parallel to the x-axis - an unlimited volume of goods can be sold at a constant price (effective competition). Thus, in the market, the elasticity of demand can range from zero to infinity, and theoretically it would be possible to determine the degree of competition from it. However, its measurement is an extremely difficult task and, for the most part, it cannot be solved accurately.

1 structure;

2 operating mode;

3 effectiveness.

The most important category is market structure, which is a fairly transparent concept and reflects the consistent alignment of firms in descending order of their market share as an indicator of market strength and the development of competitive relations (Fig. 2).

Figure 2 – Distribution of firms on the market

The level of development of competitive relations is judged by the characteristics of the market structure. Currently, economic analysis has distinguished two main concepts of competition.

The first concept highlights the behavior of sellers and buyers, the second - the structure of the market.

I. Competition, as a consequence of the behavior of sellers, can arise as a long-term phenomenon. It depends on the ability to move resources from industries with low profits to industries with the potential for higher profits. The limitations here are related to the mobility of movement of some non-mobile resources and possible barriers.

II. The structural concept of competition is associated with the formation of an understanding of a competitive market as a market 1) with a sufficiently large number of firms, 2) selling a homogeneous product, 3) in which none of the firms is able to significantly influence the price of the product by changing sales volume. Since the market demand curve is almost flat, changes in sales volume have virtually no effect on price.

Comment: In some cases, it is advisable to distinguish between the concepts of competition and rivalry. Rivalry as a struggle for a leading position is possible (rivalry = competition), but competition without rivalry is also possible. For example, agricultural production on nearby farms is competition but not rivalry (rivalry ≠ competition) because the market absorbs their yields without affecting prices.

For analysis purposes, it is necessary to identify the six most important types of seller's markets, including two parameters: the number of sellers and the nature of the product (Table 1).

Table 1 – Main types of seller's market structures

Under homogeneity of the product refers to products that are good substitutes from the perspective of the mass buyer. Differentiated Products vary in terms of quality, service, geographical location, subjective perception and are perceived as qualitatively different even at the same price. The possibilities for grading a product according to the degree of differentiation are almost endless.

When the number of sellers goes from one to two, the monopoly ends, but it is impossible to pinpoint where the oligopoly transitions to pure competition. Monopolists, oligopolists and competitors influence price by supplying a certain amount of goods and can increase sales by lowering the price, so they have monopoly or market power.

The condition for the existence of pure competition, in which sellers do not have monopoly power, is the homogeneity of the product and a significant number of sellers and buyers. The absence of barriers to entry for new firms and the mobility of used or potentially usable resources contribute to the emergence of the so-called pure or perfect competition. Significant barriers to entry into a market are an essential condition of a monopoly or oligopoly. If firms can enter and exit a market and their investments can be sold faster than decisions can be made within the market regarding entry or exit of firms, then markets are called quasi-competitive. That is, it is not the number of sellers and buyers that determines the degree of competition, but the presence or absence of entry barriers.

Comment: The degree of price control and the amount of market power of a monopolist or an oligopolist depends on the size of the firm relative to the size of the market in which it operates, although the absolute size of the firm may be small. For example, it may be the only repair shop in a small town, the only doctor, or the only (and small) company that produces the overwhelming share of scarce products in the industry. Conversely, a firm may be colossal in size but have little monopoly power in its core markets (for example, refining and selling hydrocarbons).

Short course of lectures

Topic 1. Introduction to the theory of industrial markets. History of development

The theory of industrial markets can be defined as the science of the characteristics of organization and economic consequences the functioning of industry markets and the strategic behavior of producers in imperfectly competitive markets.

Under industry market is understood as a set of enterprises that produce products similar in consumer purposes using similar technologies and production resources and compete with each other for the sale of their products on the market.

The main focus of industrial market economics is on the study of industrial and service sectors. Central location allocated to manufacturing industries due to their scale and strategic importance in national economy. The main task is to determine the role of market processes in the satisfaction of producers consumer demand, reasons leading to violations of market efficiency, and ways to regulate industry markets in order to improve the efficiency of their functioning. In this regard, the economics of industry markets serves as a theoretical basis for decision-making within the framework of industry policy of the state.

Many issues considered in the economics of industrial markets are at the same time the subject of micro economic theory. At the same time, the approaches used and the goals pursued in these areas of economic theory have significant differences:

1) in the economics of industrial markets, a systematic approach prevails, based on the analysis of many different relationships, both quantitative and institutional, while microeconomic theory is based on a strict description of the most important simple relationships;

2) the economics of industrial markets has a high practical applicability of the results and a rich empirical basis for testing the provisions; microeconomic theory operates exclusively with theoretical models.

The set of practical problems that the economics of industrial markets deals with is quite broad, from determining the optimal behavior of a manufacturing company in the market for its products to conducting systemic industry analysis and development government agencies integrated solutions on the implementation of industry policy. For example, R. Shmalenzi points out the following as the main questions answered by the economics of industrial markets:

1. What is the market for an individual product in a world of differentiated products, and what defines its boundaries?

2. What factors determine the size and structure of firms?

3. What are the key factors determining market structure?

4. What goals does the company pursue?

5. What pricing policies are typical for firms with market power, and how do they affect social welfare?

6. What capabilities do existing firms in the industry have to prevent new firms from entering the industry or displacing some existing ones?

7. What factors determine the possibility of collusion among firms and other forms of interfirm coordination?

8. What harm to social welfare occurs if a firm has market power?

History of economic development of industrial markets

The economics of industrial markets emerged as an independent branch of economic theory at the beginning of the second half of the 20th century, although interest in the economic behavior of firms and the development of industries arose much earlier.

In the economic development of industrial markets, two main directions can be distinguished:

Empirical (observations of the development and actual behavior of firms, generalization practical experience);

Theoretical (construction of theoretical models of behavior of firms in market conditions).

The following stages can be distinguished in the history of development.

Stage I. Theory of market structures (1880-1910)

In the early 1880s. The works of Jewons came out, which gave impetus to the development of the theoretical direction of economics of industrial markets and were devoted to the analysis of basic microeconomic models of the market (perfect competition, pure monopoly), the main purpose of which was to explain the efficiency of the market mechanism and the inefficiency of monopolies. The impetus for the development of research in this direction in the United States was given by the formation of the first federal regulatory bodies and the adoption of antitrust legislation. In addition to the works of Jevons, one can also highlight the works of Edgeworth and Marshall.

The impetus for the development of applied empirical research on industrial markets came from the works of Clark, published at the beginning of the 20th century.

However, the studies conducted at this stage were based on overly simplified models that did not correspond to reality, especially in terms of the behavior of oligopolistic firms in the market for differentiated products. The intensification of processes of concentration of production in most sectors of the economy of developed countries and differentiation of products led to the transition to the second stage.

Stage II. Research into markets with product differentiation (1920-1950)

Under the influence of changing economic conditions in developed countries in the 1920-1930s, a new theoretical concept of market analysis appeared. In the 1920s works by Knight and Sraffa are published. In the 1930s works by Hotelling and Chamberlin on modeling markets with differentiated products.

Some of the first works devoted to the analysis of oligopolistic markets were published in 1932-33. "Theory monopolistic competition Chamberlin, Robinson's The Economic Theory of Imperfect Competition, and The Modern Corporation and private property» Berle and Minza. These works formed the theoretical basis for the analysis of industry markets.

In 1930-1940 Based on the theoretical framework formed by these works, there is a rapid development of empirical research (Berle and Means, Allen and S. Florence, etc.).

The Great Depression also gave a certain impetus to the development of research, which necessitated a reassessment of the actual role of competition in the operation of the market mechanism.

Stage III. Systematic analysis of industry markets (1950s - to the present day)

Within the framework of this stage, the economics of industrial markets is being formed as an independent section of economic theory. In the 1950s E.S. Mason proposed the classic “Structure-Behavior-Performance” paradigm, later supplemented by Bain. In the mid-1950s. The first textbook on the economics of industrial markets is published.

In the 1960s theoretical studies by Lancaster and Marris appear.

Since the 1970s. There is a growing interest in the economics of industrial markets, caused by:

1) increased criticism of the effectiveness of government regulation, a departure from direct regulation to the implementation of antimonopoly policy;

2) the development of international trade and increasing the impact of market structure on the terms of trade;

3) growing doubts about the adaptive ability of firms in changing market conditions.

Since the 1970s Game theory methods are being integrated into the methodological apparatus of the economics of industrial markets, and studies are appearing on the problems of cooperative agreements, information asymmetry and incompleteness of contracts.

Modern research in the economics of industrial markets can be divided into two main areas, differing in the methodology used:

1) Harvard school, based on a systematic analysis of industry markets on an empirical basis;

2) the Chicago school, based on a strict analysis of dependencies based on the construction of theoretical models.

Modern theory of the firm

The theory of the firm is one of the richest and most dynamically developing areas of modern economic theory. The modern theory of the firm examines not only the internal and external aspects of the functioning and existence of a firm in various conditions, but also touches on institutional issues of economic efficiency.

The most prominent contemporary researchers within the theory of the firm are Milgrom and Roberts (1988), Hart (1989), and Holmstrom and Tirole (1989).

The main problems considered in the theory of the firm were raised already in the first half of the 20th century (for example, Knight F. (1921), Coase R. (1937)).

The problem of the existence of a firm was raised by Coase, who pointed out that classical economic theory does not provide any reason for the existence of a firm. To justify the existence of the company, Coase turned to his proposed theory of transaction costs, the minimization of which was expressed in intra-company organization. Coase also criticized the classic assertion that the structure of a firm is determined by the technology used.

In the 1960s V economic research The “owner-manager” problem (Principal-Agent Problem) has been widely developed, consisting in the presence of a conflict of interests between the owners of the company and its managers, raised in the studies of Berle and Means (1933). During the same period, studies appeared concerning the bounded rationality of economic actors, which was considered as one of the reasons for the existence of firms (Simon, March (1958), and later Coovert, March (1963)).

The theory of the firm emerged as an independent branch of economic theory in the 1970s. (studies by Williamson (1971, 1975), Alchean and Demsitz (1972), Ross (1973), Arrow (1974), Jensen and Meckling (1976) and Nelson and Winter (1982)).

Currently, three main directions can be distinguished in the theory of the company:

1) neoclassical concept of the company;

2) contractual (institutional) concept of the company;

3) strategic concept of the company.

Alternative goals of the company

The classic goal of a firm is to maximize the profits earned by the firm. However, in practice, profit maximization is not always the main goal of the company. Next, we consider several models that take into account the different goals that firms may pursue.

Baumol's model

In Baumol's model, the firm's goal is to maximize total revenue from product sales, which leads to a decrease in profit compared to its maximum level. Obviously, in this case, the sales volume will exceed the sales volume under conditions of profit maximization, which is beneficial, first of all, to the company's managers, since their remuneration is tied primarily to sales volumes. However, the owners of the company may also be interested in maximizing sales revenue; the reasons for this may be that a reduction in sales volumes in the case of profit maximization can lead to:

Reducing the market share of the company, which can be extremely undesirable, especially in conditions of growing demand;

A decrease in the market power of a firm due to an increase in the market share of other firms;

Reduction or loss of product distribution channels;

Reducing the attractiveness of the company for investors.

Williamson model

Williamson's model is based on taking into account the interests of managers, manifested in their discretionary behavior in relation to various items of the firm's expenses (Figure 2.1).

Rice. 2.1 Williamson model

Williamson in his model identifies the following main goals of managers:

1) wage and other monetary rewards;

2) the number of subordinate employees and their qualifications;

3) control over the company’s investment expenses;

4) privileges or elements of managerial weakness (company cars, luxurious offices, etc.).

The larger the size of the company, the more significant these goals become for the manager

Formally, the objective function of managers in the Williamson model includes the following variables:

S – excess staffing costs, defined as the difference between maximum profit(P max) and real profit (P A).

M – “managerial slack”, defined as the difference between real profit (P A) and reported profit (P R) (managers can either hide part of the profit or overstate reported profit compared to the real one).

I – discretionary investment expenses, defined as the difference between declared profit (P R) and the amount of tax payments (T) and the minimum acceptable level of profit for shareholders (P min).

The pursuit of these goals is limited by the need to maintain an acceptable level of reported earnings (P R). In this case, the task is written as follows:

Thus, in addition to the output volume (Q), which affects the level of real profit, managers can choose the value:

1) excess staffing costs (S);

2) the amount of expenses for elements of managerial slack (M).

The amount of discretionary investment expenses (I) is determined uniquely, since the minimum profit and tax level are given.

The solution to the above problem shows that such a firm will have higher staffing costs and greater managerial slack than a profit-maximizing firm. The differences with a profit-maximizing firm also lie in the firm’s different reactions to changes in external parameters (changes in demand, tax rates, etc.).

Self-governing enterprise model

For workers who own a firm, the goal is to maximize profits per employee. If workers have a dominant position within the firm (for example, by owning a controlling stake), the firm's policy will also be aimed at maximizing the income received by each worker in the firm.

Let the firm use a two-factor production technology, using labor (L) and capital (K) in production. Let the marginal productivity of labor decrease as its use increases. Let the firm also operate in short term in a perfectly competitive market.

Then the profit per employee of the company is:

R - the price of the product,

q – output volume,

r is the rental rate for the use of a unit of capital.

Figure 2.2 shows the dependence of the firm's total revenue (TR) on the number of employees (L). The firm chooses the level of labor use that maximizes profit per worker. Graphically, profit per employee is reflected by the tangent of the line connecting a point on the total revenue curve to the point of total capital costs.

Rice. 2.2. Choosing the level of employment in the model of a self-managing firm

The firm maximizes profit per employee when this value is equal to the marginal product of labor in monetary terms (see Fig. 2.3).

.

The second maximum condition is ensured by the law of decreasing marginal productivity.

Rice. 2.3. Proposal from a self-managed company

The behavior of a self-managing firm differs significantly from the behavior of firms aimed at maximizing profits. An increase in market price from P 1 to P 2, as shown in Figure 2.3, leads to a decrease in the level of employment and a corresponding reduction in the volume of production. Thus, the supply curve of a self-managing firm has a negative slope. The presence of a large number of such firms in the market can lead to instability of the market equilibrium.

Model individual entrepreneur

An individual entrepreneur is both the owner of the company and the employee. The goal of an individual entrepreneur is to maximize utility by choosing between profit and leisure time (see Figure 2.4).

Formally, the model of a rational individual entrepreneur can be written as follows:

The entrepreneur maximizes his utility (U) by choosing the appropriate amount of leisure (L S). Leisure time uniquely determines the time an individual spends on work, which, in turn, determines the level of profit (P(L S)). As work time increases, profits initially increase, but, starting from a certain point, the efficiency of labor efforts begins to fall, and profits, accordingly, begin to decline.

The maximum level of utility is achieved at the point of tangency between the indifference curve (U 1) and the profit function (point E on the graph).

Perfect competition

Perfect competition reflects a form of market organization in which all types of rivalry between both sellers and buyers are excluded. Perfect competition is perfect in the sense that with such a market organization, each enterprise will be able to sell as many products as it wants, and the buyer can buy as many products as he likes at the current market price, while neither the individual seller nor the market price will be able to influence the level of the market price. individual buyer.

A perfectly competitive market is characterized by the following distinctive features.

1. Smallness and multiplicity. There are quite a lot of sellers on the market offering the same product (service) to many buyers. At the same time, the share of each economic entity in the total sales volume is extremely insignificant, therefore changes in the volumes of demand and supply of individual entities do not have any impact on the market price of the product.

2. Independence of sellers and buyers. The impossibility of individual influence market subjects on the market price of products also means the impossibility of concluding any agreements between them on influencing the market.

3. Product Uniformity. An important condition for perfect competition is product homogeneity, which means that all products circulating on the market are absolutely the same in the minds of buyers.

4. Freedom of entry and exit. All market entities have complete freedom of entry and exit, which means there are no barriers to entry or exit. This condition also presupposes absolute mobility of financial and production resources. For the workforce in particular, this means that workers can freely migrate between industries and regions, as well as change professions.

5. Perfect market knowledge and full awareness. This condition assumes Free access all market participants to information about prices, technologies used, probable profits and other market parameters, as well as full awareness of events occurring in the market.

6. No or equal transport costs. There are no transport costs or there is equality of specific transport costs (per unit of production).

The perfectly competitive market model is based on a number of very strong assumptions, the least realistic of which is complete information. At the same time, the so-called law of one price is based on this assumption, according to which absolutely competitive market Every product is sold at a single market price. The essence of this law is that if any of the sellers raises the price above the market price, he will instantly lose buyers, since the latter will move to other sellers. Thus, it is assumed that market participants know how prices are distributed among sellers and the transition from one seller to another costs them nothing.

Perfect monopoly

A perfect monopoly is a market structure where there is a single seller and many buyers. A monopolist, having market power, exercises monopolistic pricing, based on the criterion of profit maximization. Like perfect competition, perfect monopoly has a number of important assumptions.

1. Lack of perfect substitutes. An increase in price by a monopolist will not lead to the loss of all buyers, since buyers do not have a full-fledged alternative to the products produced by the monopolist. However, the monopolist must take into account the existence of more or less close, albeit imperfect, substitutes for its products produced by other producers. In this regard, the demand curve for the monopolist's products has a falling character.

2.Lack of freedom to enter the market. The market of a perfect monopoly is characterized by the presence of insurmountable barriers to entry, including:

– whether the monopolist has patents for products and technologies used;

– the existence of government licenses, quotas or high duties on the import of goods;

– control by a monopolist of strategic sources of raw materials or other limited resources;

– the presence of significant economies of scale;

– high transport costs, contributing to the formation of isolated local markets (local monopolies);

– the monopolist’s policy of preventing new sellers from entering the market.

3. One seller confronts a large number of buyers. A perfect monopolist has market power, which manifests itself in the fact that he dictates his terms to many buyers independent of each other, while extracting the maximum profit for himself.

4. Perfectly informed. The monopolist has complete information regarding the market for its products.

Depending on the types of barriers preventing new firms from entering the monopoly market, it is customary to distinguish the following types of monopoly:

1) administrative monopolies due to the existence of significant administrative barriers to entry into the market (for example, state licensing);

2) economic monopolies caused by the monopolist’s policy of preventing new sellers from entering the market (for example, predatory pricing, control over strategic resources);

3) natural monopolies, due to the existence of significant economies of scale in relation to the size of the market.

The monopoly structure of the market in conditions of profit maximization by the monopolist leads to limited production volumes and inflated prices, which is considered as a loss of social welfare. At the same time, the functioning of a monopoly, as a rule, is associated with the existence of the so-called X-inefficiency, which manifests itself in the excess of real production costs to the level of minimum costs. The reasons for such inefficiency of monopoly production can be, on the one hand, irrational management methods caused by the absence or weakness of incentives to increase production efficiency, on the other hand, incomplete extraction of economies of scale due to underutilization of production capacities, due to limited production volumes while maximizing profits.

At the same time, the existence of a monopoly in some cases has its quite significant advantages. For example, a monopoly, due to the implementation of existing market power, has additional own funds, which the monopoly can use to develop innovative and investment activities, which might not be available under a different market structure. In the case of significant economies of scale relative to the size of the market, the existence of one large enterprise economically more justified than the existence of several smaller ones, since one enterprise will be able to produce products at significantly lower costs than several. A monopolist enterprise is characterized by a more stable position in the market than in any other market structure, while the scale of activity increases it investment attractiveness, which makes it possible to attract the financial resources required for development at lower costs.

Cournot model

Let's start the analysis with the simplest oligopoly model - the Cournot model, proposed by the French economist Augustin Cournot in 1838 using the example of the mineral water market.

This model is based on the following basic premises:

1) firms produce homogeneous products;

2) firms know the overall market demand curve;

3) firms make decisions on production volumes independently of each other and simultaneously, assuming the production volumes of competitors are unchanged and based on the criterion of profit maximization.

Let there be N firms on the market. For simplicity, we assume that firms have the same production technology, which corresponds to the following total cost function:

TC i (q i) = FC + c ∙ q i ,

FC – volume of fixed costs;

c is the value of marginal costs.

P(Q) = a – b ∙ Q.

In this case, we can write the profit function for an arbitrary firm i:

Each firm determines the volume of production at which it will receive the maximum possible profit, provided that the production volumes of other firms remain unchanged. Solving the problem of maximizing the profit of firm i, we obtain the function of the best response of firm i to the actions of competitors (the Nash response function in terms of game theory):

As a result, we obtain a system of N equations represented by the best response functions of firms and N unknowns. Note that if all firms are the same, as in this case, then the equilibrium will be symmetrical, that is, the equilibrium production volumes of each firm will be the same:

Where the index c indicates the equilibrium of this indicator according to Cournot.

In this case, the Cournot equilibrium will be characterized by the following indicators:

Analysis of the obtained equilibrium characteristics allows us to draw the following main conclusions:

1. In Cournot equilibrium, higher prices and lower production volumes are achieved compared to perfect competition, which leads to a net loss in social welfare.

2. An increase in the number of producers in the Cournot equilibrium leads to a decrease in the market price, an increase in the total volume of production while reducing the production volumes of existing firms, and accordingly leads to a fall in their market share and profits. Thus, an increase in the number of firms in this model has a beneficial effect on social welfare, but may be counteracted by firms already operating in the market. An example of such counteraction can be the introduction of various certifications and compulsory licensing, the activities of professional or industry associations, as well as various measures of economic counteraction to the entry of new firms into the market.

3. As the number of firms increases, the equilibrium in the Cournot model tends to be perfectly competitive and coincides with it for an infinite number of firms.

Let us dwell in some detail on how an increase in the number of firms affects the welfare of society.

Let us estimate consumer surplus (CS) at a given price P:

.

Let us substitute the P c obtained above as the price:

Consequently, as the number of firms increases, consumer welfare increases. Consider now the total welfare (SS):

.

Using the price expression again, we get:

Thus, social welfare actually increases with the increase in the number of firms in the industry, but at the same time there is a decrease in the profits of producers.

Let us now consider how the equilibrium characteristics in the Cournot model will change if the total costs of firms for production are different:

TC i (q i) = FC i + c i ∙ q i , where

q i – production volume of firm i;

FC i is the volume of fixed costs of firm i;

c is the value of the marginal costs of firm i.

In this case, assuming the market demand function remains unchanged, we obtain:

Just as before, solving the problem of profit maximization, we obtain the functions of the best response of firms to the actions of competitors:

where q - i – production volumes of all firms except i.

As a result, we obtain a system of N equations represented by the best response functions of firms and N unknowns; note that in this case, the equilibrium production volumes of firms will depend on the ratio of marginal costs in the industry. In order not to solve this system to determine equilibrium volumes production of each firm, we aggregate the resulting best response function of firm i and obtain the total equilibrium output and equilibrium price:

Thus, if firms operating in the market have different production costs, the equilibrium volume of production and price in the Cournot model depend only on the total marginal costs of firms, and not on the ratio of costs between firms; the ratio of costs determines the market share of firms.

Monopoly power of a firm

The introduction of the concept of monopoly power and the corresponding methods for measuring it allows us to analyze the influence of individual entities on the market.

Monopoly power of a firm manifested in the ability to set prices at a level exceeding the marginal cost of production (that is, above the competitive level). Indicators of monopoly power are thus based on a comparison of the structure of a real market with a perfectly competitive market.

One of the consequences of the presence of monopoly power in the market is the emergence of the so-called economic profit. The presence of economic profit for a company over a long period serves as direct evidence of the existence of monopoly power and, accordingly, market imperfection. Most indicators of monopoly power are based on the concept of economic profit.

Economic profit is defined as the difference between the firm's accounting profit (that is, the actual profit received) and the normal profit. Under normal profit is understood as the amount of profit that gives a level of profitability that is normal for a given industry or economy, respectively, if the analysis is carried out at the industry or macro level.

One of the central concepts used in determining the level of monopoly power is normal profit, the measurement of which is associated with a number of theoretical and practical problems. The determination of normal profit is discussed in financial analysis.

Normal profit in financial analysis it is understood as the opportunity cost of the company's equity capital and represents the maximum income that can be obtained by investing in other projects with the same level of risk.

In financial analysis, the CAPM (Capital Asset Pricing Model) model is widely used to determine the amount of normal profit.

Definition (CAPM).

The CAPM shows how much the return on an investment exceeds the return on a risk-free investment. As a rule, investments in government securities are taken as risk-free investments. The excess of investment return over risk-free return is risk premium.

In accordance with the CAPM model, the rate of return on investments is equal to:

R x = R f + β x (R m – R f),

where R x is the rate of return of security x;

R f – rate of return on risk-free assets;

β x is the beta coefficient of security x, which shows the risk of investing in security x compared to the risk of the market portfolio;

R m – average market return.

Market risk premium represents the value β x ·(R m – R f), reflecting the excess return on investment in security x compared to the return on investment in risk-free assets. The higher this value, the riskier the investment in this asset. Investment risk level in a particular security x is reflected by the beta coefficient (β x).

Beta coefficient(β x) shows how dependent the market value of the corresponding security is on changes in stock market conditions. Thus, a value of β x less than 1 characterizes the weak influence of market conditions on the value of a security. A β x value exceeding 1 reflects a higher risk than the market risk of investing in a given security.

For most countries, the required return on equity (R x) corresponds to normal profit. However, some difficulties may arise due to the peculiarities of accounting for use borrowed money V individual countries. For example, in some countries, costs do not include interest on bonds issued by the enterprise and part of the interest payments on bank loans, and therefore, when determining economic profit, it should include interest payments on loans from these sources, although from the point of view of economic theory, these payments should be related to costs.

In this case, to determine normal profit, you should use the weighted average cost of capital indicator WACC (Weighted Average Cost of Capital), which takes into account the financing of the company’s activities with borrowed funds:

Where

r i is the interest rate for the source of financing the activities of firm i, taking into account the inclusion of part of the paid interest in costs, including the required rate of return on equity capital;

d i is the share of funding source i in the total capital of the company.

In this case, the rate of normal profit depends on:

Return on risk-free investments;

Average market risk premium;

The risk of investing in shares of a particular company;

Proportions of equity and debt capital in total capital

Having defined the basic concepts, let us move on to consider the most common indicators of monopoly power, including:

1) rate of economic profit (Bain coefficient);

2) Lerner coefficient;

3) Tobin's coefficient (Tobin's q);

4) Papandreou coefficient.

Bane ratio (rate of economic profit)

The Bane ratio shows economic profit per one ruble of own invested capital:

Accounting profit - Normal profit

K-nt of Bane = –––––––––––––––––––––––––––––––––––––––––––––

Equity companies

Any economic system in the process of its activity constantly faces and is forced to answer three fundamental questions:

1. What produce and in what quantities?

2. How produce and at what cost?

3. For whom produce and how to distribute the products produced?

There are various alternative methods for solving this group of problems. For example, if the organization of the economy is such that all issues are within the competence of the central government, then these three issues can be resolved through central planning. If government intervention is limited to the redistribution of income between various members of society and the sale social programs, and the market answers the rest of the questions, then with this approach, consumers and producers act in accordance with prices, profits and losses that are generated by the interaction of supply and demand in freely functioning markets.

The modern market economy is a complex economic organism, consisting of a huge number of different production, commercial, financial and other structures, interacting on the basis of a system of legal business norms and united by a single concept - the market. The subject of the theory of industrial markets is connected, first of all, with the market approach and consists in studying the state of industries in industrialized economic systems. Most basic courses consider manufacturing industries as industries due to their size and strategic importance in the economy.

One can give a definition subject Coase's theories of industrial markets: Industrial organization “is a description of how economic activities are divided among firms. As you know, many companies carry out a lot different types activities, while others have a very limited range of activities. Some firms are large, others are small. Some firms are vertically integrated, others are not. This is the organization of industry or, as it is usually called, the structure of industry.”

From the name “Theory of Industrial Markets” it follows that this science deals with the organization of individual industries and markets, studies the activities of firms in the industry, the impact of their decisions on the industrial organization, patterns of formation of various market structures, principles of behavior of firms in various markets, the results of their behavior for the entire economy, options for sectoral government policy. The subject of analysis of the theory of industry markets is presented in Figure 1.1. Particularly interesting is the organization of industry in modern conditions in Russia and other countries.

Figure 1.1. – Subject of analysis: “Theories of industry markets”

To study the theory of industrial markets is to study the mechanism that brings production activity into harmonious correspondence with the demand for goods and services. The free market is such an organizing mechanism, and therefore the main object of the course is the study of the functioning of the market. The most important questions that need to be answered are the following:

· how do market processes guide the activities of producers to meet consumer demand?

· how do market processes lead markets to an equilibrium state?

· why and how market processes can be disrupted?

· how can they be adjusted so that the performance of the economy matches the required performance?

To one degree or another, the questions posed are the subject of microeconomics. However, despite the presence common features, between microeconomics and industrial economics (the theory of industrial organization) there are also important differences in both goals and methodology.

As noted F.M. Scherer(36), both theories explain economic phenomena and consider a type of market organization that connects producers with consumers, and this connection is an important variable. However, these theories differ mainly in the number of variables that are taken into account when studying phenomena and explaining them, as well as in the applicability of predictions and explanations to specific real-world situations.

The study of problems of industrial organization is important for two reasons. Firstly, research in this area has a direct impact on the definition and implementation of public economic policy in such areas as the choice between private and public enterprises, regulation and deregulation of public infrastructure sectors, maintaining competition through antimonopoly policy, incentives technical progress and much more. Secondly, in relation to many aspects of the functioning of real markets (markets of imperfect competition) in countries with developed industrial market economy uncertainty remains. Therefore, further research in this direction is certainly of practical importance.

Sectoral economics is based on the theory of the firm, the study of which precedes the analysis of industry markets. At the same time, the company is mostly considered as a separate unit making decisions aimed at maximizing profits, i.e. nothing more than a “profit-maximizing black box.” Relationship between internal organization(managerial control, delegation and execution, etc.) and market strategy is taken as given.

Subject and development of the theory of industrial markets as a science

From the title “Economics of Industrial Markets” it follows that the field of study of the discipline is: the organization of individual markets and industries, the activities of firms in the industry, the impact of their decisions on the industrial organization, patterns of formation of various market structures, principles of behavior of firms in various markets, the results of their behavior for the entire economy, options for government sectoral policy.

This science is also developing tools economic analysis market structures, deepening the understanding of patterns in this area, studying the possibility and necessity of government regulation.

Economics of industry markets can be defined as an area economic science about the peculiarities of the organization and economic consequences of the functioning of industry markets and the strategic behavior of producers in conditions of imperfectly competitive markets.

Under industry market is understood as a set of enterprises that produce products similar in consumer purposes using similar technologies and production resources and compete with each other for the sale of their products on the market.

Basic object of analysis is the study of how productive activities are brought into harmony with the demand for goods and services through some organizing mechanism (such as a free market) and how changes and imperfections in the organizing mechanism affect the progress made in satisfying economic needs.

Subjects industry market:

HouseholdsCompanies , State

The study of the interaction of market subjects within the framework of the commodity organization of production is subject research in this discipline.

Many issues considered in the economics of industrial markets are at the same time the subject of microeconomic theory.

The economics of industrial markets emerged as an independent branch of economic theory at the beginning of the second half of the 20th century, although interest in the economic behavior of firms and the development of industries arose much earlier.

In the economic development of industrial markets, two main directions can be distinguished:

Empirical (observations of the development and actual behavior of firms, generalization of practical experience);

Theoretical (construction of theoretical models of behavior of firms in market conditions).

The following stages can be distinguished in the history of development.

Stage I. Theory of market structures (1880-1910)

In the early 1880s. works came out William Jevons, which gave impetus to the development of the theoretical direction of economics of industrial markets and were devoted to the analysis of basic microeconomic models of the market (perfect competition, pure monopoly), the main purpose of which was to explain the efficiency of the market mechanism and the inefficiency of monopolies.

Stage II. Research into markets with product differentiation (1920-1950)

Under the influence of changing economic conditions in developed countries in the 1920-1930s, a new theoretical concept of market analysis appeared. In the 1920s works by Frank Knight and Piero Sraffa are published. In the 1930s works by Harold Hotelling and Edward Chamberlin on modeling markets with differentiated products.

Stage III. Systematic analysis of industry markets (since 1950)

Within the framework of this stage, the economics of industrial markets is being formed as an independent section of economic theory. In the 1950s Edward Mason proposed the classic “Structure - Conduct - Performance” paradigm, later expanded by Joe Bain. They assumed that competition is an integral part of market structure. In the mid-1950s. The first textbook on the economics of industrial markets is published.

Since this time, there has been a growing interest in the economics of industrial markets, caused by:

• increased criticism of the effectiveness of government regulation, a move away from direct regulation to the implementation of antimonopoly policy;
• developing international trade and increasing the impact of market structure on the terms of trade;
• growing doubts about the adaptability of firms in changing market conditions.

Since the mid-1980s, it has come into force new industrial economy . Representatives of the new industrial economy consider competition as a special form of interaction between firms. Moreover, to describe the variability of competitive strategies, analysts are beginning to use a special theoretical apparatus - game theory . The main goal of the new industrial economy is to show how firms, through competitive interaction, come to coordinate their activities.

Modern research in the economics of industrial markets can be divided into two main areas, differing in the methodology used:

• Harvard School, based on systematic analysis of industry markets on an empirical basis;
• The Chicago School, based on rigorous dependency analysis based on the construction of theoretical models.

Harvard School in Economics of Industrial Markets

Within the Harvard School, preference is given to empirical research the behavior of individual firms and the functioning of industry markets. Historically, this direction was formed in the 1950s, when Edward Mason and Joe Bain proposed methodological basis for researching industry markets, called the paradigm “Structure-behavior-performance” (SPR) Paradigm “Structure-behavior-performance” The main idea of ​​the SPR paradigm is that the social efficiency (effectiveness) of the industry is determined by the behavior of sellers and buyers, which depends on the structure of the market. The market structure, in turn, depends on basic conditions- fundamental factors affecting the industry market, both from the demand side and the supply side.

Thus, within the framework of the Harvard school in the economics of industrial markets, various relationships are studied that arise as a result of the functioning of the industrial market and determine the behavior of producers and their social efficiency.

Chicago School in Industrial Market Economics

The Chicago School belongs primarily to theoretical direction in the economics of industrial markets and is based on the application of methods of microeconomic analysis and game theory to study the behavior of firms and the organization of markets. One of the founders of this trend is George Stigler.

The main direction of research in the Chicago school is the analysis of problems of economic choice based on price theory. This predetermines the main subject of research; if at the Harvard school these are various factors and relationships that determine the development of the industry market, then at the Chicago school these are the patterns of decision making.

Basic concepts of the company and classification of industry markets.

Basic concepts of the company

Market classification

Depending on the purpose of economic analysis, the following types of markets are distinguished.

By objects trade deals markets may fall into the following categories:

• markets for goods and services (coffee market, car market);
• factor markets, or resource markets (labor market, capital market, raw materials market);
• money and financial markets (stock market, bond market).

By level of standardization of goods (services) markets are divided:

• to markets of homogeneous goods;
• differentiated product markets.

By type of buyer markets include:

• to the markets consumer goods
• markets for industrial goods (means of production)

By the presence and magnitude of barriers to entry highlight:

• markets without entry barriers with an unlimited number of participants;
• markets with moderate barriers to entry and a limited number of participants;
• markets with high barriers to entry and a small number of participants;
• markets with blocked entry and a constant number of participants.

By degree of adjustability market process on the part of themselves market participants markets are subdivided

• to organized markets;
• spontaneous (unorganized) markets.

By scale of operations Market participants include:

• local (local) markets;
• regional markets;
• national markets;
• international markets;
• global markets.

Hotteling model

Let’s assume that trademarks differ from each other by only one indicator – distance from the consumer. Let consumers be distributed evenly along a single street in the city. Each consumer demands one unit of a good. Two companies sell the same product. One company is located at a distance A from one end of the street, the other at a distance b from its other end. Consumers choose a company based on transportation costs: everyone buys goods from the company that is located closer to their home (Figure)

Let the consumer N lives at a distance X from company A (located at a distance A from one end of the street) and at a distance y from the company B(located at a distance b from the other end of the street). If x > y, then the consumer will prefer firm B. If x< у, то потребитель будет предпочитать фирму А. Потребитель всегда будет выбирать ту фирму, путь до которой будет сопровождаться более низкими транспортными издержками.

Let us assume that prices for goods are the same for both firms. Then, provided that the company B already located at a distance b from one end of the street and cannot quickly change its location, firm A will choose a location at which its profit will be maximum. To do this, company A must be the closest possible more consumers. Firm A will be located to the left of the firm B, on distance a 1 from the other end of the street. All consumers living at this end of the street will buy goods from firm A, and they are the majority.

In turn, the company B, since it will suffer losses from the location of firm A, it will move in the next period a little to the left of firm A, so as to intercept consumers living at this end of the street. This process will continue until both firms are in the center of the street: then they will have the same number of customers, exactly half of their total number. This equilibrium will be a stable equilibrium, since with such an arrangement no firm will have any incentive to move in any direction or change its location - a parameter of its activity.

So, if it is impossible to change the price level, the location of two firms will serve as an element of the strategy of each company and will be determined by the center of the service area. Thus, having examined the commodity markets of large cities, we notice that the highest density of stores actually occurs in city centers.

Let us now assume that the location of firms is fixed. For example, with licenses for a specific use of land or real estate.

The establishment of market prices at a fixed location of firms depends on the amount of transport costs. If firms are located at different distances from the consumer, the closest firm may charge a higher price for its product, and nevertheless, a certain number of consumers will buy it - those consumers who will prefer the convenience of location to transport costs and low price. Therefore, a conveniently (closely) located firm has a certain market power, which allows it to charge slightly higher prices.

However, the further consumers are located from one firm and the closer to another firm, the weaker the monopolistic influence of the first firm on demand turns out to be, the stronger the degree of price competition between them will be. An even greater distance of the consumer from the first firm increases the importance of transportation costs and the proximity of the other firm for him, so that as the consumer moves away from the first firm, the monopoly power of the second firm increases.

Spatial differentiation of a product due to the presence of transport costs leads to the division of the market into three segments: the monopoly power segment of the first firm, the price competition segment and the monopoly power segment of the second firm.

An increase in transport costs leads to a shift in demand lines closer to the locations of firms, so that the area of ​​price competition is reduced, and the areas of monopoly influence of each of the firms increase.

Thus, we observe a double impact of the growth of transport tariffs on the position of firms: on the one hand, an increase in tariffs leads to a narrowing of local market boundaries and an increase in the market power of the seller on regional market, and on the other hand, effective demand is reduced.

Salop model.

Salop's model allows us to analyze long-term dynamics in the market for a differentiated product, as well as the decisions of firms to enter or exit the market under the influence of changes in economic profits as a result of price competition.

Let's make the following assumptions:

The length of a uniformly populated street encircling the city is 1;

The transport tariff rate is t and reflects brand loyalty.

Firms are located along the street at the same distance from each other (in this case, if the number of firms is n, then they will be located at a distance of 1/n from each other);

The marginal costs of firms c are the same and constant, the sunk costs of entering the market are f;

Buyers have the same preferences, the maximum willingness to pay for the product is θ.

In this case, if there are few sellers in the market, each of them has monopoly power, up to the complete impossibility of price competition (Fig. 5.4 a). In the market, as well as in the Hotelling model, dead zones arise. If the maximum willingness of buyers to pay for a product is high enough and allows for economic profit, then in the long run, unsatisfied demand will cause new sellers to enter the market, between whom price competition arises (Fig. 5.4 b). In fact, the presence of dead zones means that there are unoccupied niches in the market.

Rice. 5.4b Presence of price competition in the Salop model

Thus, price is directly dependent on brand loyalty and the magnitude of sunk costs of entry. An increase in sunk costs limits the equilibrium number of firms in the market and leads to an increase in the difference between the equilibrium price and the value of marginal costs.

19)Bertrand model with differentiated product

The standard Bertrand model assumes perfect substitutability between the goods of two firms. However, firms can also produce heterogeneous (differentiated) products. Suppose that the demand for each firm's product is described by the following equation:

Qdi(Pi, Pj) = a - bPi + dPj

where Pi is the price charged by this company;

Pj is the price of a competing company (i, j = 1.2; i ≠ j), and 0 AC(b-d).

Let the costs per unit of goods for both firms be identical, constant and equal to AC.

Here we see that the goods of two firms - firm i and firm j - serve as imperfect substitutes for each other. The direct price elasticity of demand for a product is negative, the cross elasticity of demand for a product is positive (as follows from the signs of the coefficients at prices). If the price Pi is sufficiently large compared to the price Pj, then the quantity demanded for the product of the i-th firm is zero. However, with a small price difference, even if the competitor’s price exceeds the price of this company, some part of the buyers will remain faithful to this product due to commitment

brand. Condition d< b означает, что если цены товаров обеих фирм вырастут на бесконечно малую величину ε, объем спроса на оба товара сократится. Условие а >AC(b-d) means that if both firms set prices at marginal cost, the quantities demanded for their goods will be positive.

Let us determine the result of such interaction between firms, that is, we will find a set of prices (Pi*, P2*) such that Pi* ensures profit maximization π = (Pi - AC) Qd(Pi, Pj); i = 1, 2; j ≠ i.

The difference between the equilibrium price and marginal (and average) cost is positive for each firm.

So, we see that product differentiation softens price competition, so that rivalry between firms does not lead to the complete disappearance of their profits. In the model considered, the level of product differentiation was a given value. Meanwhile, in most cases, manufacturers themselves choose the degree of product differentiation. Having studied Bertrand's model of price competition with a differentiated product, we can intuitively come to the conclusion that the optimal level of product differentiation in an oligopoly is different from zero.

Stackelberg model

game-theoretic model of an oligopolistic market in the presence of information asymmetry. Named after the German economist Heinrich von Stackelberg, who first described it in his work Marktform und Gleichgewicht (Market Structure and Equilibrium), published in 1934.

In this model, the behavior of firms is described by a dynamic game with complete perfect information, which distinguishes it from the Cournot model, in which the behavior of firms is modeled using a static game with complete information. The main feature of the game is the presence of a leading firm, which is the first to set the volume of production of goods, and the remaining firms are guided in their calculations by it.

Basic Prerequisites

The industry produces a homogeneous product: the differences between the products of different companies are negligible, which means that the buyer, when choosing which company to buy from, is guided only by price

Firms set the quantity of products produced, and the price for it is determined based on demand.

There is a so-called leader company, the production volume of which is used by other companies.

Cournot model (briefly)

One of the first models of oligopoly is the duopoly model (2 firms in an industry), proposed by the French economist Cournot. The Cournot model is based on three premises:

There are only two firms in the industry;

Each firm takes the other's output for granted;

Both firms maximize profits.

At the initial moment in the industry there is only one firm producing the entire industry output. A new company appears and begins to operate, believing that the production and price of the old company remain the same. To break into the market, a new company lowers the price of its product and takes away some market segment from the old company. The old company takes the current situation for granted and reduces production in accordance with the decreased demand for it. The new company takes the situation for granted and, in order to further gain a foothold in the market, again reduces the price of its product and conquers a new market segment. The old firm accepts the new firm's increased output and price and again reduces its output and its presence in the market. So gradually firms come to a division of the market that corresponds to the balance of their forces.

Types of market structures.

Market structure is understood as a set of many different signs and features that reflect the characteristics of the organization and functioning of a particular industry market. The concept of market structure reflects all aspects of the market environment within which a company operates - the number of firms in the industry, the number of buyers in the market, the characteristics of the industry product, the relationship between price and non-price competition, the market power of an individual buyer and seller, etc. The specific characteristics of competitive and non-competitive interactions within large market formations make it possible to distinguish several types of market structures. Market structure is understood as a structure that satisfies the following criteria:

· Number of sellers and buyers;

· Size of sellers and buyers (market share);

· Degree of product homogeneity;

· Availability and magnitude of barriers to entry into the market;

· Symmetry (asymmetry) of information on the market;

· The influence of sellers and buyers on the market price;

So different combinations

the above factors form

the following types of market structures:

1) Perfectly competitive market. It is characterized by the following features:

§ The presence of a large number of economic agents, sellers and buyers;

§ The largest company in the industry produces an insignificant volume of sales (purchases) compared to the entire market;

§ Free entry into and exit from the market - the presence of a high degree of mobility of resources between sectors of the economy;

§ Uniformity of products sold;

§ Maximum information for sellers and buyers about products and prices, all economic agents have full knowledge of the economic parameters of the market;

§ Lack of significant influence on the market price on the part of sellers and buyers.

2) Market of monopolistic competition:

§ The presence of a large number of buyers and sellers.

§ Production and sale of a differentiated product.

§ Absence of barriers to entry and exit.

§ Availability of, as a rule, unused capacities.

§ Market price is higher than marginal cost but equal to long-run average variable cost.

3) Oligopoly and oligopsony occur when:

§ The number of sellers (buyers) of goods is small.

§ Sellers (buyers) are large economic agents.

§ There are significant barriers to entry and exit.

§ The product sold can be either homogeneous or differentiated.

§ When deciding on price and sales volume, each firm takes into account the expected (expected) reaction of its competitors.

4) A market with a dominant firm means:

§ The presence of a dominant company - an agent that sells or buys a significant share of the total market volume (usually more than 35%) and at the same time is capable of strategic behavior - to use its advantages in order to influence the market.

§ The presence of a large number of firms producing the same or similar goods, but not able to influence the market price.

§ The market price is set under the strong influence of the dominant firm; outsider firms accept it as given by the market.

§ The presence, as a rule (though not always), of barriers to entry and exit.

5) Monopoly/monopsony characterized by such features as:

§ The presence of one manufacturer (seller) or one buyer of a given product.

§ The presence of large barriers to entry.

A monopoly market allows a firm to obtain the highest possible profits from market structures by reducing the industry's output as much as possible compared to a perfectly competitive market and charging the highest price accordingly. It cannot be said that a monopoly sets a price arbitrarily: the condition of equality of marginal indicators (additional indicators per unit of production) determines the volume of production and sales of the monopolist, and the market price is set depending on the elasticity of demand for this market.

Examples of a monopoly market: show business stars, famous athletes; a company with a patent for innovation (“Microsoft”), prestigious consumption markets. Monopsony companies, for example, are city-forming enterprises (mines).

6) Natural monopoly(or natural oligopoly) will occur where there are such market characteristics:

§ Positive economies of scale in the long run, explained by technological reasons in the industry.

§ Large initial capital investment.

§ Minor additional production costs.

§ There may be other firms that will be unprofitable in the long run.

Industries characterized by natural monopoly are electric power, pipeline transport, water utilities, housing and communal services, railway transport, metro services, information technology industries, telephone communications, gas industry.

Herfindahl-Hirschman index

The Herfindahl-Hirschman index is defined as the sum of the squares of the shares of all firms operating in the market: n is the number of firms.HHI – Herfindahl-Hirschman Index

The Herfindahl-Hirschman coefficient shows what place and share in a given market is occupied by sellers who own small shares. The higher the value, the higher the concentration of the market in question. Based on the values ​​of the Herfindahl-Hirschman index, three types of markets are distinguished:

· Type I – highly concentrated markets: at 1800< HHI < 10000

· Type II – moderately concentrated markets: at 1000< HHI < 1800

Type III – low concentrated markets: with HHI< 1000

Dispersion of market shares

Dispersion is defined as the deviation of the market shares of all firms in the market:

= ; - average market share. – dispersion of market shares.

The dispersion index is measured in absolute values and can take any value. It characterizes the possible market power of firms through the inequality of their size. The greater the dispersion, the more uneven and, therefore, more concentrated the market is, the weaker the competition and the stronger the power of large firms in the market.

However, dispersion does not characterize the relative size of firms; for a market with two firms of the same size and for a market with 100 firms of the same size, the dispersion in both cases will be the same and equal to zero, but the level of concentration will obviously be different. Therefore, dispersion could only be used as an auxiliary measure, rather to assess inequality in firm size rather than the level of concentration. But other things being equal (with the same number of firms in industries and approximately equal other indicators of seller concentration), it can also serve as an indirect indicator of concentration.

Linda index

The Lind Index is used to assess the relative strength of the leading firms in a market compared to other large and small firms.

The Linda index can be defined as follows:

, where L is the Lind index, K is the number of large sellers (from 2 to N); - the relationship between the average market share of the i-th sellers and the share of the K-i-th sellers; i is the number of leading sellers among K large sellers; , - total share market, attributable to i-th sellers; - market share attributable to k large sellers.

The Lind index is used as a determinant of the “border” of the oligopoly as follows: L is calculated for K=2, K=3 and so on until > , that is, the first violation of the continuity of the indicator L is obtained. The “border” is considered established when reaching a minimum value compared to .

The Linda Index is used primarily within the European Community to assess the behavior of the most influential firms among the largest sellers in an industry.

Tobin Index

The Tobin index is calculated as the ratio of the market (external, exchange) value of a company’s assets to the internal value of its assets (replacement cost):

Where q- Tobin index; Sryn - market price company assets; Svos- replacement cost of the company's assets.

How more q, those stronger power of the company. If q < 1, это означает неблагоприятные времена для фирмы, возможно, фирма находится на грани банкротства и близка к вытеснению с рынка.

The replacement cost of assets is equal to the amount of expenses required to acquire the firm's assets from current firms.

M&A Models

In modern corporate management, many different types of mergers and acquisitions of companies can be distinguished. We believe that the most important classification features of these processes include:

1) The nature of company integration

· Horizontal mergers - the union of companies in the same industry that produce the same product or carry out the same stages of production;

· Vertical mergers - the combination of companies from different industries related technological process production of the finished product, i.e. expansion by the purchasing company of its activities either to previous production stages, up to sources of raw materials, or to subsequent ones - to the final consumer. For example, the merger of mining, metallurgical and engineering companies;

· Generic mergers - an association of companies producing related products. For example, a company that produces cameras merges with a company that produces photographic film or chemicals for photography;

· Conglomerate mergers - the association of companies from various industries without the presence of a production community, i.e. This type of merger is a merger of a firm in one industry with a firm in another industry that is neither a supplier, nor a consumer, nor a competitor. Within the conglomerate, the merging companies have neither technological nor target unity with the main field of activity of the integrator company. Profiling production in this type of association takes on a vague outline or disappears altogether. In turn, three types of conglomerate mergers can be distinguished: mergers with product line expansion, mergers with market expansion, and pure conglomerate mergers.

2) Nationality of the merged companies

· National - an association of companies located within one state;

· Transnational - mergers of companies located in different countries ah, acquiring companies in other countries. Considering globalization economic activity, in modern conditions characteristic feature mergers and acquisitions are becoming not only of companies from different countries, but also of transnational corporations.

3) Attitude of companies towards mergers

· Friendly mergers - mergers in which the management and shareholders of the acquiring and acquired (target, selected for purchase) companies support this transaction;

· Hostile mergers - mergers and acquisitions in which the management of the target company (target company) does not agree with the upcoming transaction and carries out a number of anti-takeover measures. In this case, the acquiring company has to conduct on the market valuable papers actions against the target company with the aim of its takeover.

4) Method of combining potential

· corporate alliances are an association of two or more companies, concentrated on a specific separate line of business, ensuring a synergistic effect only in this direction, while in other areas of activity the companies act independently. Companies for these purposes can create joint structures, for example, joint ventures;

· corporations - a type of merger when all the assets of the companies involved in the transaction are combined.

In turn, depending on what potential is combined during the merger, we can distinguish:

· production - these are mergers in which the production capacities of two or more companies are combined in order to obtain a synergistic effect by increasing the scale of activity;

· purely financial - these are mergers in which the merged companies do not act as a single whole, and significant production savings are not expected, but centralization takes place financial policy, helping to strengthen positions in the securities market and in financing innovative projects.

Price discrimination of the first kind (perfect CD)

the practice of charging each buyer a fee equal to his subjective price, that is, the maximum price the buyer is willing to pay. It is, rather, an ideal case, since the seller does not know absolutely exactly the subjective price of each buyer. However, sometimes the seller may engage in imperfect (in practice) price discrimination of this kind. This is possible in the case when the seller is represented by such specialists as: doctors, lawyers, accountants, architects, etc. - who have the opportunity to more or less accurately estimate how much their client is willing to pay the maximum for their services and charge based on from this, the corresponding account. With perfect price discrimination, the producer takes all consumer surplus for himself.

As we have already seen, the optimum of an ordinary monopoly is determined by the intersection of the MC and MR curves (point K in Fig. 7.24). The output volume will be QM, the price will be PM, the consumer's rent will be LPMA, and the manufacturer's rent will be РMAКМ. If a monopolist can carry out perfect price discrimination, he will sell each unit of production at a price equal to the corresponding demand price: the first unit of production at price P1, the second at price P2, etc. Obviously, by pursuing such a policy, he will be able to increase the volume of output until the intersection of the MC and D curves, that is, to the QK level corresponding to the situation of perfect competition. However, in contrast to it, instead of a single price PK, a monopolist who carries out perfect price discrimination will sell products at different prices.

As a result, his rent will increase to LMKN, while the consumers' rent will obviously fall to zero. In other words, the entire consumer rent will be appropriated by the monopolist.

In its pure form, perfect price discrimination is difficult to implement. Approaching it is possible in the conditions of individual production, when each unit of product is produced according to the order of a specific consumer, and prices are set under agreements with customers.

Types of Industry Policies

The theory (economics) of industrial markets is one of the youngest and most dynamically developing areas of economic science. The first attempts to analyze the sectoral organization of the market were made in the period 1887 – 1915. In the period from 1933 to 1940. analysis of industry markets is becoming especially popular, which is associated with the economic depression in the world and the desire to reassess the role of competition in markets of different levels. Then in the middle of the twentieth century. interest in this area of ​​research cooled down a bit, which was due to a shift in attention to stabilizing the economy and supporting the underdeveloped economic regions. However, already in the 1970s. Interest in studying the functioning of industry markets is emerging again and is rapidly gaining momentum.

In foreign universities, the economy, like the organization, of industry markets has a longer and rich history teaching spanning several decades. In Europe and the USA, courses called “Economics” and “Industrial Organization” are taught.

Theoretical basis of this course are developed and presented mainly in the works of Western scientists. Currently, works devoted to this issue are also appearing in Russia.

There is no single approach to the question of what “Economics of Industrial Markets” actually studies. Another significant question is whether this discipline is an in-depth course in microeconomics or whether it is an independent direction. Many foreign experts believe that the name of the discipline does not fully convey the content of the subject of study. This is due not only to the presence of different scientific directions in economic thought in general, but also in microeconomics in particular.

Verbatim from English this course called “Industrial Economics”, in Russia various interpretations are used: “Economics and organization of industrial markets”, “Economics of industrial markets”, “Theory of industrial markets”, “Theory of organization of industrial markets”, “Theory of industrial organization”, etc. Of course, with Over time, scientists will find more precise definition course, but using the name “Industrial Economics” is not acceptable in our country, because the area of ​​economic theory under consideration has very little in common with it. Therefore, for now the most appropriate title can be considered “Economics of Industrial Markets”.

It is quite difficult to give a clear definition of the economics of industrial markets; this is due, according to many authors, to the fact that its boundaries are rather vague. That's why economics of industry markets can be defined as a field of theoretical and applied research that is associated with the analysis of the economy and organization of various industry sectors modern economy and the market structures emerging within their framework. This idea is given by Jean Tirole, who emphasizes the need to concentrate on studying the functioning of markets and the various structures inherent in them. According to this, the economics of industrial markets has as its main task the study of the functioning of markets, the interaction of markets and enterprises, and also examines the economic policy of the state related to the management of markets and market structures. Including policies to support competition and regulate the activities of monopolies, including natural ones, as well as industrial, technological, innovation policies and a number of other aspects of government regulation. At the same time, the economics of industry markets combines aspects of micro and macroeconomic analysis market conditions, making it possible to expand the scope of scientific research.

It is also difficult to find in the economic literature an exact definition of the object of economics of industrial markets. This is due to the same reasons why it is quite difficult to define this discipline.

From the title “Economics of Industrial Markets” it follows that the field of study of the discipline is: the organization of individual markets and industries, the activities of firms in the industry, the impact of their decisions on the industrial organization, patterns of formation of various market structures, principles of behavior of firms in various markets, the results of their behavior for the entire economy, options for government sectoral policy.

This science is also involved in developing tools for economic analysis of market structures, deepening the understanding of patterns in this area, and studying the possibility and necessity of government regulation.

Thus, economics of industrial markets is a branch of economics dedicated to the study of markets that cannot be analyzed using standard models of perfect competition.

Basic object of analysis is the study of how productive activities are brought into harmony with the demand for goods and services through some organizing mechanism (such as a free market) and how changes and imperfections in the organizing mechanism affect the progress made in satisfying economic needs.

Area of ​​study modern theory Organization of industry markets covers three groups of issues:

– questions of the theory of the company: its scale, scope of activity, organization and behavior;

– imperfect competition: exploring the conditions for acquiring market power, the forms of its manifestation, the factors of its preservation and loss, price and non-price competition;

– society’s policy towards business: what should be the optimal policy towards business (both traditional antimonopoly policy, market regulation, and issues of deregulation, liberalization of conditions for entry into the industry, privatization, stimulation of technological and product innovations, competitiveness).