Vortrag
Evidence of Market Power in the Atlantic Steam Coal Market Using Oligopoly Models with a Competitive Fringe

Clemens Haftendorn

27th Annual Congress of the European Economic Association : EEA 2012
Malaga, Spanien, 27.08.2012 - 31.08.2012



Abstract:
The representation of market power in numerical partial equilibrium models is often derived using the concept of conjectural variations. We provide a better understanding of this concept from the theoretical basis to its implementation in numerical models. We use an analytical duopoly model in different settings to show that the best response of a player can be in conflict with the assumptions used in numerical partial equilibrium models. In particular we show that the use of mixed aggregated conjectural variations can lead to outcomes that are inconsistent with the actions of rational profit-maximizing players. We then develop alternative models for the representation of markets with dominant players and a competitive fringe based on the Stackelberg model. In a numerical application to the Atlantic steam coal market we are able to show that the dominant players exerted market power in a non-cooperative way in 2004.