Introduction to the economics of the industry. Product, geographic and time boundaries of the market Depending on the type of consumers
Single markets and cross price elasticity. The concepts of "market" and "industry" are closely interrelated. An industry is a group of enterprises. Enterprises that are part of the industry offer their products in one separate - single market. Let us first turn to the definition of the concept of unit markets. To do this, it is necessary to dwell on the consideration of the cross-price elasticity of demand for goods and services offered in the market.
Cross price elasticity of demand shows the relative change in the volume of demand for one product with a relative change in the price of another product and is measured by the coefficient of cross price elasticity of demand.
The coefficient of cross price elasticity of demand shows the ratio of the relative change in demand for the i-th product and the relative change in the price of the y-th product. The coefficient of point cross-price elasticity of demand is determined for infinitesimal changes in price and quantity demanded as:
where E. ( . - coefficient of point cross elasticity of demand for the i-th product at the price of the "-th product; 0. - the value of demand for i-th product; R. - the price of the th product; With! - total differential sign.
More commonly used is the cross-arc price elasticity of demand, which is defined as:
where D is an increment sign denoting some small final change.
The coefficient of cross-arc elasticity of demand for price can be calculated as follows. Let the demand for the /-th product with an increase in the price of the j-th product by 1.0% decreased by 0.5%. Then the coefficient of cross elasticity according to the formula (1.2) will be:
0,5/1,0 = - 0,5.
The cross elasticity coefficient can be positive, negative or zero. If the cross elasticity coefficient eu> 0, then goods / and y are interchangeable, an increase in the price of the th good leads to an increase in demand for the /th good. This will be the case, for example, for various types of vegetable oil.
If a eu
If a eu = 0, then such goods are independent, an increase in the price of one good does not affect the quantity demanded for the other. This will be the case, for example, for sugar and cars.
The value of the coefficient of cross elasticity can serve to determine the boundaries of individual markets - markets for goods satisfying the same need. Recall that goods are all that is used to satisfy needs, this is the whole variety of goods and services.
The factor that determines the cross-price elasticity of demand is the properties of goods, their ability to replace each other in consumption. If two goods - goods - can be equally used to satisfy the same need, the coefficient of cross-price elasticity of these goods will be high, then these goods can be attributed to one unit market.
The coefficient of cross elasticity in the form presented by expressions (1.1) and (1.2) can be used to characterize the interchangeability and complementarity of goods with small price changes.
When prices change significantly, there will be an income effect, which will lead to a change in demand for both goods. For example, if the price of meat drops sharply, consumption of not only meat, but also other products will increase. In this case eu
A reliable assessment of the relationship of substitution, as well as the complementarity of goods, is given by calculations of cross elasticity, if we exclude the influence of the income effect, i.e. if the valuations are performed under the condition of constant income of buyers:
and- soshe
where and - buyers' income.
If a eu> 0, then such goods are called net substitutes - pure substitutes, in contrast to gross substitutes, determined by the criterion Eu > 0. If Ey 0, then such goods are called net-supplementary, in contrast to gross-supplementary, determined by the criterion eu
The cross replacement effect is symmetrical:
Chamberlin's classification of markets and industry definitions.
Many economists use cross elasticity to define separate, single markets and industry affiliations for different industries.
E. Chamberlin suggested using two criteria to identify and classify individual markets and industries. As the first criterion, an assessment of the interchangeability of goods offered by different enterprises was proposed. As another - an assessment of the interdependence of these enterprises.
The first criterion can be represented by the coefficient of price cross elasticity of demand for goods offered by enterprises / and y:
where ey - coefficient of price cross elasticity of demand for goods offered by enterprises / and y; d-! - the value of demand for the goods of the enterprise /; /?. - the price of the goods of the enterprise y; With! - differential sign.
The second criterion can be represented by the coefficient of volumetric, or quantitative, cross elasticity:
where eu- coefficient of quantitative cross elasticity of demand for goods offered by enterprises / and y.
In expressions (1.4) and (1.5), in contrast to expression (1.1), it is assumed that prices and demand for goods of individual enterprises are considered, and not the characteristics of the market as a whole. Therefore, in expressions (1.4) and (1.5), in contrast to expression (1.1), the quantities of demand and prices are indicated by small letters q "lp. Expressions (1.4) and (1.5) give estimates of point elasticity indicators.
The coefficients of price and quantity cross elasticity of goods of two enterprises in arc terms can be represented as:
dq j P ’
E r 4/4" AR; / R, U- '
Y/ /H) v. R, where A is the increment sign.
The first criterion, evaluated by expressions (1.4) and (1.6), characterizes the impact of a change in the price of the product of the j-th enterprise on the sales of the product of the i-th enterprise.
The second criterion, evaluated by expressions (1.5) and (1.7), characterizes the influence of the sales of goods of the j-th enterprise on the price of the /"-th enterprise.
The higher the price cross elasticity, the higher the homogeneity of the goods produced by these enterprises, the more perfect their interchangeability, and the more reason to attribute these enterprises to one industry, and the goods produced by them, to one single market.
The higher the quantitative cross elasticity, the more rigid the interdependence of enterprises and the more reason to attribute these enterprises to the same industry.
If the volume cross-elasticity is high, the interdependence of sellers is significant, none of them can ignore the reactions of others to their behavior, even if the goods offered in such a market are very heterogeneous.
If volume cross elasticity tends to zero, each seller can ignore the reaction of competitors to his actions, no matter how many there are in the market and no matter how close substitutes to his product the goods they offer may be.
Industry. The foregoing allows us to give the following preliminary formulation of the concept of an industry: an industry is a set of enterprises offering their goods in one single market, where their price and volume cross elasticities are high.
A practical method for defining industry boundaries. In practice, to determine the boundaries of the market, an assessment of the correlation of prices of goods over time is often used. A high positive correlation - close to unity value of the correlation coefficient of price movement of goods for a long time - indicates that the goods are close substitutes and form one single market, and enterprises offering goods in this market form an industry.
Goods - any item of economic turnover, including products, works, services, documents confirming obligations and rights (in particular, securities)
(Extract of Article 1 "Definition of terms" of the Law of Ukraine "On protection of economic competition" Adopted by the Verkhovna Rada of Ukraine 11012001 N 2210-III)
. Composer's note. The same wording is found in P13 "General Provisions" "Methods for determining the monopoly (dominant) position of business entities in the market" Approved by order. Antim of the Monopoly Committee of Ukraine dated 503 2002 N 49-r Registered in. Ministry of Justice of Ukraine 1042002r for N 317/6605їи 1.04.2002r. for N 317/6605).
Goods - a product of activity (including works, services, as well as securities) intended for sale
(Extract from Article 1 "Definition of the terms" of the "Law of Ukraine" "On limiting monopoly and preventing unfair competition in entrepreneurial activity" Adopted by the Verkhovna Rada of Ukraine 18021992r N 213 32-XII 18.02.1992 N 2132-XII).
Commodity market boundaries
Commodity market boundaries - a product (commodity group), a set of similar, homogeneous items of economic turnover, within which the consumer, under normal conditions, can switch from the consumption of a certain type of items of economic turnover to the consumption of another.
(Excerpt from. P13 "General Provisions" "Methods for determining the monopoly (dominant) position of business entities in the market" Approved by order. Antimonopoly Committee of Ukraine dated 503 2002 2r N 49-r Registered in. Ministry of Justice of Ukraine 1042002r for N 317 / 6605ni 1.04.2002r . for N 317/6605).
Concerted action
Concerted actions are the conclusion by business entities of agreements in any form, the adoption of decisions by associations in any form, as well as any other coordinated competitive behavior (activity, inaction) of business entities. Concerted actions are also the creation of a business entity, an association, the purpose or consequence of which is the coordination of competitive behavior between the state economic entities that created the specified business entity, association, or between them and a newly created business entity, or entry into such an association.
(Extraction of Article 5 "Agreed Actions" of the Law of Ukraine "On the Protection of Economic Competition" Adopted by the Verkhovna Rada of Ukraine 11012001 N 2210-III)
Participants in the concentration of business entities
Concentration participants are:
business entities in relation to which the merger, accession is being carried out or should be carried out;
business entities that acquire or intend to gain control over the enterprise, and business entities in respect of which control is acquired or gained control of business entities, assets (property), shares (shares, shares) of which are acquired in ownership, received for management (use), rent, leasing, concession or have nabutisya, and their buyers (recipients), acquirers
business entities that are or intend to become founders (participants) of a newly created business entity. If one of the founders is an executive authority, a local authority, a body of administrative and economic management and control, an enterprise whose assets (property), whose shares (shares, shares) are contributed to the statutory fund of the newly created entity, is also considered a participant in the concentration. management;
individuals and legal entities associated with the participants in the concentration, specified in paragraphs two to five of this article, by relations of control, which gives grounds to recognize the corresponding group of persons in accordance with the article. Thea 1 present. Law as a single business entity.
(C. 23 "Participants in the concentration of business entities" of the Law of Ukraine "On the protection of economic competition" Adopted by the Verkhovna Rada of Ukraine 11012001 N 2210-III)
Time limits of the market
Temporal boundaries of the market - the time of market stability, that is, the period during which the structure of the market, the ratio of supply and demand on it do not change significantly
(Excerpt from. P13 "General Provisions" "Methods for determining the monopoly (dominant) position of business entities in the market" Approved by order. Antimonopoly Committee of Ukraine dated 503 2002 2 N 49-r Registered in. Ministry of Justice of Ukraine 1042002r for N 317/6605ni April 1, 2002 for N 317/6605).
The uncertainty of the concept of the industry in the second approach raises the problem of determining the boundaries of the industry. Determining the boundaries of an industry essentially means identifying the enterprises that are part of the industry. There are the following types of market boundaries:
1. Product boundaries of the market
From the industry definition, it follows that the main factor defining the boundaries of the industry is product . In marketing, a product is understood as everything that can satisfy a need / Kotler /. However, goods that satisfy the same need may be either completely identical, or similar in basic characteristics, or differ significantly. For example, if a person feels thirsty, then he can drink water or milk, or beer - and these are all different goods and different industries, despite the fact that enterprises in these industries will compete with each other (inter-industry competition). At the same time, milk will differ in fat content, appearance of packaging, manufacturers and other parameters - that is, all milk producers will compete with each other (intra-industry competition).
Therefore, it is correct to speak not just about the product, as a factor that determines the boundaries of the industry, but about the product group. Product group may include either completely identical goods, or differentiated goods, or goods that do not have close substitutes /Andreev/ (see Table 3).
Table 3
The ratio of the composition of the product group, the type of market and the composition of the industry
| Product group features | Market Type | Example | The composition and structure of the industry |
| 1. The commodity group consists of homogeneous goods | 1. Perfect competition | Grain producers | |
| 2. Oligopoly | Manufacturers of ferrous and non-ferrous metals, gasoline, etc. | ||
| 2. The commodity group consists of differentiated goods | 1. Oligopoly | Manufacturers of cars, computers, etc. | There may be 2 or more manufacturers on the market (but up to 10-15), and at least one of them is able to influence the situation in the industry |
| 2. Monopolistic competition | Manufacturers of food products, hygiene products, etc. | There are many manufacturers on the market, the share of each is small and none of them is able to influence the situation in the industry | |
| 3. A product group includes 1 product that has no close substitutes | 1. Monopoly | Electricity producers | The entire industry is represented by the only seller who can fully control the situation on the commodity market |
Goods that are close substitutes, as a rule, are considered as part of a separate industry, as a separate product group.
2. Industry price limits
The essence of the action of price boundaries is that, at a certain price ratio, substitute goods, considered as different industry markets, can be part of one industry market, which can be explained by the example of the Guterenberg curve (see Fig. 3).
The Guterenberg curve says that the demand curve for goods that have substitutes does not have a classic falling shape, but a broken one. At the same time, three sections with different elasticity can be distinguished on the demand curve: sections of the curve SA and BD, more elastic than the plot AB. What does this mean?
Suppose: there are two substitute goods on the market, in Fig. 3 shows the demand curve for one of them. On the curve AB demand is inelastic, which means that some change in price (ranging from R 1 before R 2) will not cause a significant change in sales volume. This is due to the high commitment of buyers to the product by giving it distinctive features, unique properties, or for some other reason. Therefore, the product and the product-substitute are considered as different industry markets. But if the price falls below R 2, then many buyers will refuse to purchase a substitute product in favor of a cheaper, but better and more prestigious product. As a result, substitute goods will become part of the same industry.
However, the price increase R 1 will cause a significant decrease in sales, as the company will lose a significant part of the buyers who will refuse to purchase a product with unique properties in favor of a simpler and cheaper substitute product. As a result, substitute goods can be considered as part of one industry.
The only problem is to determine the range of prices within which the composition of the industry can change. As a rule, the price range is revealed as a result of marketing research or by expert means. The criterion for selecting the price level at which the composition of the industry can change is the change in the cross price elasticity of demand between two goods (Ed overlap):
|
where D Q 2,% - change in demand for the second product, %;
DP1,% - price change for the first product, %.
If a E d overlap is positive, then the goods in question are substitutes. If at the same time meaning elasticity of demand for a company's product E d < 1, то товар находится на отрезке АВ и занимает с товаром-заменителем разные рыночные ниши; если значение elasticity of demand for the company's product will increase, then the product will "cross" the boundaries R 1 and R 2 and become part of the substitute product industry. If E d overlap has a negative value, then the goods in question are not substitutes, most likely these are goods that complement each other.
3. Geographical boundaries of the market
Depending on which geographical markets will be taken into account when defining the boundaries of the industry, both the composition and structure of the industry will change. In theory, there are:
1. Local market is a product market in a specific place of sale;
2. Local market is a market in a specific locality;
3. Regional market;
4. Domestic market;
5. International market.
4. Time limits of the market
The temporal boundaries of the market suggest that over time, the composition and structure of the industry may change due to unequal growth rates of various enterprises in industries, the emergence of new competitors on the market and the departure of old competitors from the market, the emergence of new products on the market and the departure of old products from the market, and etc.
Under industry is understood as a set of sellers offering buyers a product designed to satisfy the same need in the same way//. Based on this definition, the following differences from the first definition can be noted.
Firstly, the main thing is not only to produce products, but to sell them, that is, the structure of the industry will be determined not by production volumes, but by sales volumes.
Secondly, this approach does not take into account either the method of production of the goods or the materials used, only the goods themselves are important here, designed to satisfy the need. So, if a metal chair, a soft chair, a plastic chair, from the point of view of the first approach to the concept of the industry, I would single out three industries (metalworking, chemical industry and furniture industry), then in the second case, all enterprises offering chairs on the market are part of one industries compete with each other for buyers.
Thirdly, if a manufacturer simultaneously offers goods to buyers through a direct marketing system and through a system of intermediaries, then in this case they will be competitors in the same market segments, which requires a more rigorous approach to developing distribution channels.
In general, it can be noted that this concept of “industry” in the Russian antimonopoly legislation corresponds to the concept of “commodity market”.
One of the most complete definitions of a commodity market is given in the Law “On Protection of Competition”: “A commodity market is a sphere of circulation of goods (including foreign-made goods) that cannot be replaced by another product, or a sphere of circulation of interchangeable goods, within which (including geographic) based on economic, technical or other feasibility or expediency, the purchaser can purchase goods, and such an opportunity or expediency is not available outside of it.
Thus, the criteria of the relevant market are commodity (product) and geographical boundaries, within which for a particular subject of market relations, relations of competition and monopoly are formed.
1. Product boundaries of the market.
Identification of the product boundaries of the market is a procedure for determining: a product (its consumer properties), substitute products, a product group (a group of products whose markets are regarded as one product market).
The definition of the product under study is carried out according to indicators, the composition of which is differentiated depending on the type and purpose of the product:
Consumer properties of the goods- the totality of its technical, economic and aesthetic properties that are recognized or (expected) to be recognized by consumers as useful properties. The consumer properties of a product are formed due to such characteristics as reliability, durability, appearance, finish, novelty of style, conformity to fashion, etc., which make it different from other goods.
From the point of view of the buyer, the product satisfies or does not satisfy a well-defined need, which significantly affects the product boundaries of the market. For example, the carriage of passengers and the carriage of passengers by public transport are two different needs that form two different markets. Moreover, it should be noted that the need can be satisfied with the help of goods that have different consumer properties, but the same utility.
In addition, the product, in relation to which the boundaries of the market are determined, as well as the structure of the market, is a product of activity that is sold as a whole. And it is precisely that set of products of activity that is sold as a whole and for which a single price is set, which is the commodity in question, which forms the product boundaries of the market.
For example, if the delivery service is included in the mandatory set and the cost of delivery, then it is this set - the product and the service for its delivery - that should be considered as a product. If the product and service are not included in the same package, then it is considered that these two goods function in different markets. Thus, a good as a good has many dimensions, the totality of which makes it possible to identify the good itself.
Conditions (methods) for the sale of goods influence the composition of sellers and buyers, and are associated with the satisfaction of various needs to a certain extent. For example, when selling on wholesale and retail markets, there are different requirements for the packaging of goods, for its price, so different ways of selling goods determine different industry markets.
All characteristics of the commodity market are evaluated for one condition (method) for the sale of goods or for conditions (methods) for the sale of goods, which can be recognized as interchangeable. As interchangeable ways of selling goods, those that do not lead to a significant change in the geographical boundaries of the market, the composition of sellers and buyers can be considered. It is assumed that the composition of buyers, with correctly defined boundaries of the commodity market, is practically preserved or the change in this composition can be neglected if the selling price of a unit of goods changes by no more than 5 = 10%.
Thus, wholesale and retail trade are fundamentally different ways of selling goods, since they entail a significant difference in prices per unit of products sold, within the geographical boundaries of markets, in the composition of sellers and buyers.
The definition of the product boundaries of the market should be based on the opinion of buyers about the interchangeability of goods that make up one product group. Identification of goods - substitutes included in the product group being determined, is carried out according to the criterion of interchangeability, which are divided into two types: interchangeability by demand and interchangeability by consumption.
Two goods are interchangeable in demand if a significant number of buyers are ready to replace these goods with one another when prices (quality) change relative to each other. These buyers are called marginal consumers. To clarify this aspect, it is necessary to conduct consumer surveys and collect price data.
Two goods are interchangeable in supply if producers are ready and able to urgently (for example, within one year) switch from the production of one product to the production of another without incurring significant sunk costs.
When the definition of market boundaries in terms of demand does not coincide with the establishment of market boundaries in terms of supply, then in such cases a broader definition of the boundaries of the product market is chosen.
One of the criteria for the interchangeability of goods in terms of consumption is the indicator of cross-price elasticity of demand. In practice, they also resort to more accessible and less laborious methods for assessing the interchangeability of goods - expert assessments, interviews with buyers and specialists.
In the countries of the European Community, other criteria for identifying a market are also used, namely the rate of change in revenue with a change in price, as well as the correlation of prices of goods over time.
The indicator of change in revenue when the price changes.
For example, if with an increase in the price of product A, revenue has increased (or, accordingly, the additional profit of sellers is positive), the market is limited only to this product. If the revenue has decreased (the additional profit of producers is negative, or at least non-positive), then, therefore, there is a close substitute, product B. Therefore, it is wrong to talk about the market for product A, you need to look for product B and check the market for product A again using the proposed method. + B. Thus, the dynamics of revenues and profits of manufacturing firms with a long-term price increase indicates the boundaries of the market. This criterion is based on the principle of direct price elasticity.
Correlation of commodity prices over time.
A positive correlation in the movement of prices for goods over a long period of time (5-10 years) indicates that goods are stable substitute goods, that is, they form one market. It can be seen that this criterion, like the definition used by Joan Robinson, is based on the concept of cross-price elasticity.
2. Time limits of the market.
The choice of the time interval for the functioning of the market, for which the relevant characteristics are determined, depends on the objectives of the study, but should not be less than one year. When determining time limits, one should take into account the regularity of deliveries, that is, how evenly the goods arrive and whether they are constantly present on the market. If episodic deliveries are noted, then it is necessary to decide whether this is due to the seasonal nature of the commodity market or indicates the presence of barriers to entry. If the product in question has a seasonality in production or sale, it is necessary to consider an interval of two years.
The analysis is subject not only to the existing industry market, the characteristics of which are determined for the retrospective period, but also the prospects for 1-2 years of development of this market, taking into account the influence of various factors on the market.
3. Geographic boundaries of the industry market
The geographical boundaries of an industry market determine the territory where buyers from a selected group have an economic opportunity to purchase the product in question, and sellers sell this product or its close substitutes and do not have such an opportunity outside this territory. The criteria for the presence or absence of the possibility of acquiring (selling) a product is not a physical opportunity as such, and not the availability of financial resources, but the choice of the consumer (seller) within those financial (budgetary) and other types of restrictions. In practice, the antimonopoly authorities often a priori identify the geographical boundaries of markets with the boundaries of administrative and territorial entities, which has a negative impact on the assessment of the level of concentration and the identification of the dominant position of companies in the market.
The establishment of geographical boundaries of markets depends on at what stage of the reproduction process (production or sphere of circulation) the relationship between economic entities is considered. When a product moves from the sphere of production to the sphere of distribution relations, the points of intersection of the economic interests of the subjects of the reproduction process change and, as a result, the geography, structure and parameters of the market change. Thus, the geographical boundaries of the market are determined for a certain product, the established product boundaries of the market, the time interval and the way the product is sold.
The belonging of different territories to the same geographic market is affected by the interconnectedness of demand, the presence of customs barriers, institutional restrictions, national (local) preferences, differences (significant / insignificant) in prices, transport costs, supply substitution, transaction costs.
When identifying the geographical boundaries of the market, the following factors are taken into account:
The ability to move demand between territories supposedly included in a single geographic market, that is, the availability of vehicles to move the buyer to the seller;
Insignificance of transportation costs for moving the buyer to the seller: with significant differences in the cost and consumer qualities of goods and the levels of profitability of operations in the commodity markets, these values \u200b\u200bmay differ from each other and fluctuate within 5-10%.
Thus, territories in which the cost of goods with delivery fluctuates within acceptable limits for the consumer can be combined into one geographical market. In world practice, it is customary to take, as the boundary of maximum remoteness, the place of purchase of goods from the location of the consumer, the threshold of a five percent increase in the price of goods with delivery compared to the price of goods purchased near the consumer. For Russian conditions, the five percent limit unreasonably narrows the geographical boundaries of the market, which requires clarification from buyers.
The narrowing of the contingent of buyers (sellers) due to various factors will lead to their reorientation to another product market, or to a reduction in demand, which may result in a reduction in the capacity of the market in question and (or) a change in its geographical boundaries.
The possibility of moving goods between territories supposedly included in a single geographical market is ensured on the condition that:
Insignificance of additional costs for the transportation of goods from the seller to the buyer;
Preservation of the quality level and consumer properties of the goods during its transportation;
Absence in the given territory of administrative restrictions on the import or export of goods;
Comparable price level for relevant goods within the boundaries of this market.
The geographical boundaries of the market are related to the interchangeability of supply and demand.
Fungibility in demand means that producers (suppliers) located in different regions are considered to be operating in the same geographic market if the ability of each of them to raise prices is limited by the ability of consumers to switch to buying from other producers (suppliers).
Supply interchangeability means that two regions are considered to be part of the same geographic market from the point of view of supply if the supplier supplying (providing) one region is able to urgently and without significant sunk costs switch to supplying (providing) another region.
Thus, the set of buyers of different geographic markets practically does not overlap, which cannot be said about the set of sellers. One seller can work in different geographic markets.
It is impossible to imagine any market in modern conditions without inter-regional (international) integration and exchange. As a result, when assessing variables significant for concentration, it is necessary to take into account foreign companies or economic entities from other regions as competitors. An assessment of the openness of the market for entry of sellers from other regions significantly reduces market concentration, reduces the share occupied by local producers operating on the market.
Algorithm for determining the geographical boundaries of the commodity market:
1. Determine the list of commodity producers of interchangeable goods.
2. For each commodity producer, determine the addresses of wholesale or retail sale of goods.
3. Separate groups of suppliers working in the wholesale and retail markets. Determine which markets, wholesale or retail, will be considered. If wholesale markets are further studied, then suppliers with only retail sales should be excluded.
4. Addresses of the wholesale (retail) sale of goods of commodity producers roughly determine the location of the first wholesale (retail) commodity markets.
5. From the possible locations of the wholesale (retail) markets, one is selected and the geographic market is determined for the previously defined seller who works at this address.
6. The composition of other sellers operating in this geographical market is determined. If the list of sellers is exhausted, then it is considered that the geographical boundaries of the market have been determined. As a result, one or several markets for interchangeable goods located in the area of previously established delivery addresses, and the composition of the sellers of goods in these markets, should be determined.
The peculiarity of the Russian markets lies in the presence on the territory of the Russian Federation, along with the “federal” ones, of a number of territorially closed markets for interchangeable products, which is determined by: a significant spatial extent of the territory of the state, which entails increased requirements for communication routes and conditions for transporting goods, the cost of their transportation; poor development of communications; weak competition between modes of transport; high cost of cargo transportation; low population density in a significant part of the territory of the Russian Federation.
Allocate a classification of markets based on their geographical boundaries:
1. Local or local market- this is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in territories where there is a demand for the goods in question, within the administrative boundaries of one municipality.
That is, the purchase of goods in another municipality for persons living in the territory of the first municipality leads to an increase in the prices of goods that are too significant for them, taking into account delivery. But it should be noted that the geographical boundaries of the local (local) commodity market do not necessarily and do not always coincide with the administrative boundaries of the municipality, but lie within these boundaries.
2. Regional commodity market - this is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in territories where there is a demand for the goods in question, within the administrative boundaries of one subject of the Russian Federation.
3. Interregional commodity market - this is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in territories where there is a demand for the goods in question, within the administrative boundaries of two or more (but not all) subjects Russian Federation.
It is necessary to distinguish between the interregional market and the interregional flow. The interregional trade flow is characterized by the movement of goods between the respective territories, while consumers do not have the opportunity to purchase goods in all territories covered by the exchange of goods at a price with delivery that does not exceed the barrier of profitability of the acquisition.
4. Federal commodity market - this is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in the territories where there is a demand for the goods in question, within the state border of the Russian Federation.
5. World commodity market - This is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in all territories where there is a demand for the goods in question. That is, there are no countries in which any buyer from any country could not purchase a product or its purchase would not be approximately equally profitable at any point of sale.
6. Intercountry commodity market - this is a market for a certain product (a group of interchangeable goods), characterized in that the conditions for comparability of the price level and approximately equal opportunity to purchase goods from different sellers are met in territories where there is a demand for the goods in question, within two or more, but not all (unlike world market). That is, the purchase of goods in other territories that are not covered by the geographic boundaries of the cross-country goods market leads to a too significant increase in prices for goods, taking into account delivery.
The presence of a world market precludes the existence of national markets for the same product. Cross-country commodity markets do not exclude the simultaneous existence of other geographical markets for the same product, in particular national (federal), regional, etc.
Determination of the composition of sellers and buyers in the sectoral market.
Within the identified boundaries of the market, the composition of sellers and buyers is determined, depending on at what stage of the reproduction cycle (production or circulation) economic relations of subjects are considered. Participants in the commodity market can be both producers of goods and services, and trade and intermediary enterprises that, in addition to purchase and sale operations, carry out a wide range of other trade and intermediary services.
Wholesale and retail trade are different ways of selling goods in terms of technology and content, which determines the different composition of sellers and buyers, different product and geographical boundaries of the market.
The subjects of the commodity market are independent sellers and independent buyers. In the presence of economic dependence of economic entities, a group of persons should be considered as a seller. To determine the group of buyers, the criterion is used that each of the buyers can purchase goods from any of the sellers selling the goods in a particular market.
Lecture topic:
Market, its main structures and determinants
Questions:
Market and industry: concept, boundaries, classifiers.
Market structures and their basic determinants.
The level of concentration and the factors that determine it. Industry concentration indicators.
Market power and its indicators.
The firm as a market entity. The problem of choosing a goal by the firm. Profit maximization hypothesis. Alternative goals of the firm.
Literature
[ 6 , Ch. one;7, Ch.1,2,5;12 , Ch.1-3;14 , Ch.7;15 , Ch.1.
Topics of abstracts and reports
Institutional theories of the firm.
Literature for writing essays and reports
1. (13 , With. 344 - 351).
Issues for discussion
Consider different approaches to defining the boundaries of the market, choose the most correct approach, in your opinion, and argue in its favor.
Compare the advantages and disadvantages of the main indicators of the concentration of sellers in the market.
Is it enough for a firm to have a high level of market concentration in order to have monopoly power?
It is known that state regulators judge the level of monopoly power mainly by the value of concentration indicators and do not use indicators of market power. Why do you think?
Determine the criteria underlying the classification of firms and, in accordance with them, name the types of firms.
Questions for the exam on the course "Microeconomics
(advanced level)" for undergraduates on this topic are similar to lecture questions.
Question 1. Market and industry: concept, boundaries, classifiers.
Market - is a set of economic relations regarding the sale and purchase of goods at prices established on the basis of the interaction of supply and demand as a result of competition.
Market - basic concept of industry economy. It is in the market that firms interact. There are many definitions and criteria for assessing the market. The most general concept J. Tyrol, who proposed to consider the market"... a homogeneous product, or a group of differentiated products that are good substitutes (or complements) for at least one of the products of this group and interact to a limited extent with another economy."
Industry market is a phenomenonanalyzedWith demand positions (According to the theory industry organization).
One of the main issues of economics is the relationship between the market and the industry.
Industry Yu is a set of enterprises that produce goods that are substitutes in production (produced using homogeneous resources and similar technologies).
Industry considered from a supply perspective goods on the market.
Differences between industry market and industry :
The market is united by a satisfied need;
The industry is united by the nature of the assets used.
The concept of the industry is wider than the concept of the market . For example, the chemical industry as an industry may serve a range of markets that demand different types of products. In turn, the market and sub-industry, united within a particular industry by the production of similar goods, can sometimes be considered as related concepts. Such a simplification is all the more acceptable, the more specialized the enterprises of the sub-sector
At the beginning of the twentieth century. formed basic approach s to the analysis of the organization of industry markets: Harvard School and Chicago School (analysis from the point of view of price theory). First approach can be called systemic orbasicapproach ("structure - behavior - result). Harvard paradigm was developed by professors of Harvard University E. Mason and D. Bain in the 1930s-50s. At the heart of this approach, as already noted, there are three main elements. In a simplified form, it looks like this: the structure of a certain market, which is understood as a separate industry or some enterprise (for example, an oligopoly). The structure determines the type of market behavior of the market agents involved in it (for example, price collusion of enterprises), which, in turn, determines the results of the functioning of the market and the enterprise (for example, a high level of profitability) (Fig. 1).
Second approach basedon the use of microeconomic models and pricing theory.(D.Stigler even expressed the point of view that the economics of industrial markets does not exist as a separate field of knowledge in economic theory, but simply coincides with the theory of contract prices (conventional price theory) in microeconomics).
Over the years, these approaches have been developed, mutually complementing each other. (We follow the second approach)
Definition industry market boundaries related to the purpose of the study.
The boundary of the industry market allows you to determine the circle of firms that produce goods for it. An industry is a set of firms producing products that fall within the boundaries of an industry market based on similar resources and similar technologies. The extent to which the range of enterprises operating in a given market is correctly defined is usually checked using indicators of specialization and coverage. If the values of these indicators are large enough, the study of the structure of the industry market can contribute to the emergence of qualitative research results.
(For example, if it is necessary to evaluate the effectiveness of state policy in the field of energy. The entire electricity market should be considered simultaneously: coal, gas, oil and nuclear energy production. If mergers of two coal mining companies are analyzed, then the coal industry is considered in the narrow sense words ....) (L-ra. - L.V. Roy, V.P. Tretiak. Analysis of industry markets. - Ch.2. p. 27-31)
There are several types of market boundaries :
– food borders , reflecting the ability of goods to replace each other in consumption;
– time limits , allowing a comparative analysis of the development of markets over time;
– local boundaries , limiting the markets in question within a given territory.
(The necessary breadth or narrowness of boundaries in each particular case depends, firstly, on the characteristics of the product, and secondly, on the goals of the analysis. Thus, for a durable good, the time limits of the market will be much wider and less defined than for a current consumption good. For consumer goods, one market is characterized by a larger number of product names than for goods for industrial purposes. The definition of the local boundaries of the market depends on the actual severity of competition among sellers in the national or world market and on the height of the barriers to penetration of "external" sellers into the regional market.) (L-ra. - Vasilyeva + Roy)
Determining the boundaries of the market is of great importance in the work of the antimonopoly committees of many countries. The boundaries of the industry market include a homogeneous product and its substitutes until there is a sharp break in the chain substitute goods. Once cross price elasticity becomes less than a certain value, we can talk about a break in the chain of commodity substitutes, and hence, about the border of the market. By setting different values of cross-price elasticity, it is possible to obtain different scales of the industry market.
In the countries of the European Union, there are other criteria for identifying a market:
1) the indicator of change in revenue when the price changes , based on the principle of direct price elasticity. For example, if the price of good A has increased, how has the revenue of producers of this good changed? If revenue has increased (or, accordingly, the additional profit of sellers is positive), the market is limited only to product A. If revenue has decreased (the additional profit of producers is negative, or non-positive), there is a close substitute, product B. Therefore, it is incorrect to speak of a market for product A, you need to look for product B and check again the market for product A + B. The dynamics of revenues and profits of manufacturing firms with a long-term price increase indicates the boundaries of the market, is based on the principle of direct price elasticity, demand in such a market is quite inelastic. In this case, an increase in the seller's price leads to an increase intheir earnings;
2) to correlation of commodity prices over time . The positive correlation of price movements of goods over a long period of time (5–10 years) indicates that goods are sustainable substitutes, i.e. constitute one market. This criterion is based on the concept of cross price elasticity. If goods A and B are close substitutes, an increase in the price of good A leads to an increase in the demand for good B and, other things being equal, to an increase in the price of good B;
3) G geographical limitation of the market . As a criterion of belonging to one geographic market, the same conditions of competition are distinguished, such as the interconnectedness of demand, the presence of customs barriers, national (local) preferences, differences in prices, transport costs, etc.
Sometimes, having identified the boundaries of the market, it is necessary to determine the firms that produce goods in this market.The extent to which the range of enterprises operating in a given market is correctly defined is usually checked using indicators of specialization and coverage. If the values of these indicators are large enough, the study of the structure of the industry market can contribute to the emergence of qualitative research results..
Let us consider the production of goods X by enterprises that we have assigned to the corresponding industry (sub-sector) X. In this case:
– specialization indicator- the share of sales of goods X to the total sales of enterprises classified by us in industry X;
- coverage rate- the share of sales of goods X by enterprises classified by us in industry X, to the total sales of goods X
Classification of industry markets
Due to the presence of various types of boundaries of industry markets, the totality of markets can be classified according to various criteria.
Classification features :
- activities its participants - (industrial, non-industrial, financial, intellectual).
- transaction objects - (commodity, financial, real estate; factors of production);
- operating conditions - (opene - free market entry for new firms ; closed- there are barriers to entry into the market ; spontaneous;organized- for example, stock trading, auctions; stable; unstable; seller; buyer);
- degree of localization sd Christmas trees (territory, time); For example, according to the degree of localization of trade transactions, industry markets are:
global,
Regional,
local,
Local.
- relationship types(vertical, horizontal);
- the nature of the interaction(competitive, non-competitive)
- market maturity stages(Pioneering, growing, mature or developed, fading or shrinking).
The types of markets in an economic organization can be represented as a diagram (see Fig. 1).
Fig.1. The main features of the classification of industry markets
The classification of markets is of great importance in identifying the types of market structures, organizing production activities by firms, and carrying out regulatory measures by government agencies.