This paper investigates competition and market share dominance in the Indian fertilizer sector during a process of deregulation, using a newly constructed database.
The author presents an entry model for a homogenous good and symmetric firms. An additional parameter, lambda, is introduced to allow for market share dominance by the former monopoly. In the empirical application, the size of this advantage is linked to competition between the private and cooperative sectors in the credit market.
She uses 2 approaches to make inference on the effect of new firm entry on the toughness of competition in the absence of good price data. The first is estimating a quantity equation, with a number of firms ordered probit selection rule. This provides additional information on the effect of entry on quantities, which can point to a competitive effect, but not quantify it. The second approach is using a change in price regulation that took place during the period of analysis. By assuming the variable profits were constant with regard to the number of firms in a period of fixed prices, the author can infer the entry effect on the variable profits in a period with market prices.
This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme
Itin-Shwartz, B. (2017) Competition and Market Power in Deregulated Fertilizers in India
Competition and Market Power in Deregulated Fertilizers in India
Published 1 November 2017