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