The Degree of Competition in the Thai Banking Industry before and after the East Asian Crisis

This paper analyzes the influence of the East Asian crisis and the subsequent reforms on the oligopolistic nature of the Thai banking industry. Since the crisis, there have been substantial changes in competitive environment, including a decline in the family ownership of banks as well as the arrival of new entrants. How did these changes affect a banking industry in which the six largest local banks accounted for over 70 percent of market share? The estimated Lerner index from Bresnahan's [1989] conjectural variation model indicates the possibility of a decline in the degree of competition.

Integration versus Outsourcing in Stable Industry Equilibrium with Communication Networks

For the selection of a firm's structure between vertical integration and arm's-length outsourcing, the importance of the thickness of the market had been emphasized in the previous literature. Here we take account of communication networks such as telephone, telex, fax, and the Internet. By doing so, we could illustrate the relationship between communication networks and the make-or-buy decision. With communication network technology differing in each type of firm, both vertically integrated firms and arm's-length outsourcing firms coexist, which was never indicated in the previous literature. However, when common network technology is introduced, such coexistence generically does not occur.

On the Evolution of the Spatial Economy with Multi-unit/Multi-plant Firms: The Impact of IT Development

This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit/multi-plant firms. The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost products (such as consumer electronics) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tend to have multiple plants serving to segmented markets, even in the absence of wage differentials.

Globalization and the Evolution of the Supply Chain: who gains and who loses?

This paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the re-location of plants into the periphery. In particular, when the process of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

Perfecting the Catching-up: The Case of Taiwan's Motorcycle Industry

The final stage of the catching-up process has formidable hurdles. This paper examines the case of Taiwan’s motorcycle industry and shows how latecomers overcame the hurdles. In the early 1990s, the two largest motorcycle makers in Taiwan, Sanyang and Kwang Yang, had completed the catching-up process and became independent from Honda, on which they had technologically depended since the early 1960s. The requisite for independence was acquiring the capacity for product innovation. The two assemblers could cultivate technological capacity by investing abundant resources, which they accumulated in the protected market. It should be noted that although the market was protected and highly concentrated, it was also very competitive. Another condition was the solid local suppliers of parts and components. The local suppliers had also grown under the government’s industrial policies. However, their development beyond imitators can be attributed to their own initiatives.

Inferring the Effects of Vertical Integration from Entry Games : An Analysis of the Generic Pharmaceutical Industry

This paper introduces a novel method for examining the effects of vertical integration. The basic idea is to estimate the parameters of a vertical entry game. By carefully specifying firms' payoff equations and constructing appropriate tests, it is possible to use estimates on rival profit effects to make inferences about the existence of vertical foreclosure. I estimate the vertical entry model using data from the US generic pharmaceutical industry. The estimates indicate that vertical integration is unlikely to generate anticompetitive foreclosure effects. On the other hand, significant efficiency effects are found to arise from vertical integration. I use the parameter estimates to simulate a policy that bans vertically integrated entry. The simulation results suggest that such a ban is counterproductive; it is likely to reduce entry into smaller markets.

Chapter 5 Product Differentiation versus Geographical Differentiation: Evidence from the Pork Processing Industry in China

This chapter attempts to identify whether product differentiation or geographical differentiation is the main source of profit for firms in developing economies by employing a simple idea from the recently developed method of empirical industrial organization. Theoretically, location choice and product choice have been considered as analogues in differentiation, but in the real world, which of these strategies is chosen will result in an immense difference in firm behavior and in the development process of the industry. Development of the technique of empirical industrial organization enabled us to identify market outcomes with endogeneity. A typical case is the market outcome with differentiation, where price or product choice is endogenously determined. Our original survey contains data on market location, differences in product types, and price. The results show that product differentiation rather than geographical differentiation mitigates pressure on price competition, but 70 per cent secures geographical monopoly.

Preferential trade agreements and antidumping actions against members and nonmembers

In a three-country oligopoly model, this paper analyzes a country's decisions concerning antidumping (AD) action against two foreign countries and the relationship between those decisions and regional trade agreements (RTAs). An RTA intensifies product-market competition in the markets of member countries and lowers product prices, while it raises export prices of goods subject to tariff reductions. This effect widens the dumping margin of the non-member firm and narrows the dumping margin of the member firm. If the government is more concerned with domestic firm profit in its AD decision, the RTA may invoke the member's AD action against the nonmember. If the governments attach a sufficiently high value on social welfare, however, the RTA may promote the AD action against the member. If the governments' weight on the domestic firm's profit is neither high nor low, an RTA may block the AD actions against both countries.