An Economic Instrument to Evaluate the (Pro)Competitive ... · The Aggregate Index of Competitive...

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An Economic Instrument to Evaluate the (Pro)Competitive Nature of Industries: The Aggregate Index of Competitive Pressure Radu A. Păun, Ph.D. Research Department, Romanian Competitition Council [email protected]

Transcript of An Economic Instrument to Evaluate the (Pro)Competitive ... · The Aggregate Index of Competitive...

An Economic Instrument to Evaluate the

(Pro)Competitive Nature of Industries:

The Aggregate Index of Competitive Pressure

Radu A. Păun, Ph.D.

Research Department,

Romanian Competitition Council

[email protected]

The Aggregate Index of Competitive Pressure

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The Aggregate Index of Competitive Pressure (AICP):

oRelatively new instrument (developed in H2 2013)

oComposite index based on 20 individual factors

oBased on information available internally to RCC

oNational industries evaluated, not relevant markets

oMeasures competitive pressure, not actual competition

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More details:

o20 factors, split into 4 classes (different weights):

• A+: Barriers to entry

• A: Number of competitors, Concentration, Demand elasticity,

Innovation, Business associations, Product homogeneity,

Transparency

• B: Cost symmetry, Market share symmetry, Market growth,

Maverick, Marketing & communication, Structural links,

Demand shocks, Buyer power

• C: Market share evolution, Multi-market contact,

Profitability, Price level

oFactors suggested by microeconomics and practice

oGeneral factors, not industry specific → comparability

oEach factor is evaluated on a 7-point scale

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AICP limitations:

oFocus on collusion, not on unilateral behavior/abuse

oComposite index (multiple criteria decision-making)

oNot applicable in highly regulated industries

oNot applicable for global industries

AICP uses:

oInternal market monitoring

oDecisions on sector studies/infringement investigations

oDiscussions with authorities and regulators

oCompetition authority’s impact assessment

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Sum up before results…

o20 individual factors, each evaluated on a 7-point scale

oFactors included in 4 classes, different weights

oLow AICP values are “bad”, high values are “good”

o20 industries evaluated starting 2013, 1 run per year

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Latest AICP results (2015)

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Evolution of AICP results (2013-2015, bottom 10)

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Evolution of AICP results (2013-2015, top 10)

The Aggregate Index of Competitive Pressure

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An intermediary view

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Current situation: going from 20 to 50 industries

Possible further developments:

oAdd new factors?

oMore detailed scales?

oMore factor classes?

oAnother system to allocate weights?

oExternal validation of factor evaluations?

Thank you!

[email protected]