Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

0

Share

Download to read offline

20170909 jae watanabe

Download to read offline

2017年日本経済学会での報告スライド。

Related Books

Free with a 30 day trial from Scribd

See all

Related Audiobooks

Free with a 30 day trial from Scribd

See all
  • Be the first to like this

20170909 jae watanabe

  1. 1. Identifying Competitive Neutrality of SOEs in China: A Case of Three Electronics Industries Mariko Watanabe Japan Economics Association, 2017 Mariko Watanabe Competitive Neutrality JEA, 2017 1 / 24
  2. 2. Motivation Competitive Neutrality of SOEs? SOEs does or does not harm market competition? Alleged“ predatory pricing ” What is done here? Identify competitive neutrality of SOEs in three electronics industries in the 2000 ’s China Quantifying the willingness to pay by estimating demand function Built and test a simple supply model of “Neutrality” violation due to soft budget. What’s new? Application of structural estimation to capture “nature of competition” in WTP-price dimensions Capturing competition with WPT-Price dimension Under construction of the structure. Only demand side. Mariko Watanabe Competitive Neutrality JEA, 2017 2 / 24
  3. 3. Contents Literature: SOE and Competition Neutrality Theoretical Model: Logit Demand and Competition with soft budget constraint Positioning in WTP-Price dimension from Demand Estimates   A Reduced form test on Competition with soft budget constraint Summary Mariko Watanabe Competitive Neutrality JEA, 2017 3 / 24
  4. 4. SOE and China: Background 1 Why focusing on SOEs ? Corporate governance/Competition Law literature SOE should be regulated? If yes, why? Ownership or Competition? 2 History of Economic Reform in China Inefficient management under planned economy Monopolistic behavior and mergers by SOEs since the 2006 Privatization or Competition Neutrality? Mariko Watanabe Competitive Neutrality JEA, 2017 4 / 24
  5. 5. SOE and China: Background 3 types of markets in China 1 Monopoly connected with political power Petro refinery, Railways, Telecommunication 2 “Bad” Mixed market Competition among heterogeneous entity, that is, SOE, Private, FOE with Overcapacity, Keen price competition. Electronics, Steel, Alminum 3 “Good” Mixed Market Pure private market Competition with innovation Internet related firm Mariko Watanabe Competitive Neutrality JEA, 2017 5 / 24
  6. 6. SOE and Competition: Literature 1 Mixed Market literature Outcome via competition among“ profit maximizer ”and“ welfare maximizer ” Matsumura and Matsushima (2004) Luts and Pezzino (2010) De Fraja (2009) Gosh and et.al (2015) Target: Public utility industries such as electricity NOT applicable to current China’s SOEs issue. China’s SOE has never required to maximize“ social welfare ”until 2014. Mariko Watanabe Competitive Neutrality JEA, 2017 6 / 24
  7. 7. SOE and Competition: Literature 2 Practical argument OECD ’s Competitive Neutrality Framework Corporate Governance code to SOEs SOEs should maintain“ competition neutrality ” TPP were going to apply this principle. Competitive Neutrality Framework SOE should not enjoy competitive advantage thanks to their ownership. SOE should comply with competition neutrality principle. What conducts violate the neutrality? Mariko Watanabe Competitive Neutrality JEA, 2017 7 / 24
  8. 8. Anti Competition Conducts Chaporbianco and Christiansen (2011) 1 Predatory Pricing Set price unprofitably low so as to expel out their rivals 2 Raising Rivals’ cost 3 Cross Subsidies When SOE running on multiple market, give subsidies from on market to another so as to suppress the rivals 4 Strategic Adoption of inefficient technology This paper will test the first point: Predatory Pricing Mariko Watanabe Competitive Neutrality JEA, 2017 8 / 24
  9. 9. SOE and Competition, China Competitive non-neutrality may be allegedly a cause of “over capacity” Electronics Industry Iron and Steel Industry : G20 Iron and Steel Forum An essay of Zhou Qiren (2006) Mariko Watanabe Competitive Neutrality JEA, 2017 9 / 24
  10. 10. Structure: Demand and Supply 1 Demand: Nested Logit BLP model Differentiated market 2 Supply: Competition among soft budget and hard budget constraints If soft budget constraint firm worsen the quality of market competition, it violates competition neutrality. Hypothesis here is “soft budget generates excess price competition, and deteriorate WTP of products” Mariko Watanabe Competitive Neutrality JEA, 2017 10 / 24
  11. 11. Heterogenous constraint firm A and B Generic marginal cost c for both firm A and B. Firm A can get subsidy D even when she make deficit. Then, realized cost becomes as follows: cA = c − D (1) cB = c (2) (3) Thus, Firm A can set price as low as, pA ≥ c − D = cA pB ≥ c = cB Mariko Watanabe Competitive Neutrality JEA, 2017 11 / 24
  12. 12. Equilibrium constraint firm A and B At equilibrium, p∗ A = 3c − 2D + tB + 2tA + BA − BB 3 (4) p∗ B = 3c − D + tA + 2tB + BB − BA 3 (5) Thus, the market share of A, xA, becomes as follows: x∗ A = { 2tA+tB +BA−BB +D 3(tA+tB ) (D ≤ tA + 2tB + BB − BA) 1 (D ≥ tA + 2tB + BB − BA) (6) Proposition 1 Amount of debt affects level of equilibrium price and market shares. Proposition 2 Equilibrium price of the rival of a soft budget constraint firm is higher than that of a soft budget constraint firm. Mariko Watanabe Competitive Neutrality JEA, 2017 12 / 24
  13. 13. Utility function and Competitive Position Utility function uijt = −αi pjt + βXjt + Unobservablejt + error (7) Consumer will choose products on Willingness to Pay (WTP)-P dimension. WillingnesstoPayijt = βXjt +Unobservablejt αi Pricejt CSijt = WTPijt − Pjt Firm position their product on this dimension Benefit (Differentiation) advantage position: high WTP and high/middle Price Cost advantage position: low Price and middle/low WTP Mariko Watanabe Competitive Neutrality JEA, 2017 13 / 24
  14. 14. Data I utilizes 30 city market survey data from GfK research China. Air Conditioner 2000-2011 Mobile Phone 2001-08 Color TVs 2000-07 Demographic Data : China Urban City Statistical Yearbook Ownership Data: Companies profiles and listed companies annual reports. Financial Statement of listed in Shanghai and Shenzhen markets Mariko Watanabe Competitive Neutrality JEA, 2017 14 / 24
  15. 15. Shares of production by ownership :AC Mariko Watanabe Competitive Neutrality JEA, 2017 15 / 24
  16. 16. Shares of production by ownership :CTV Mariko Watanabe Competitive Neutrality JEA, 2017 16 / 24
  17. 17. Shares of production by ownership: Mobile phone Mariko Watanabe Competitive Neutrality JEA, 2017 17 / 24
  18. 18. Demand Estimates: AC, CTV, Mobilephone AC CTV Mobilephone ln(sj ) − ln(so) price/wage:α -5.496*** -1.110*** -6.422*** (0.431) (0.060) (0.797) ρctvtypes 0.995*** (0.060) ρOS 0.245** (0.106) β cooling capacity 0.0001*** (0.000) power consumption capacity -0.0004*** (0.000) HP: 1 to 2 0.544*** (Reference=1HP below) (0.124) HP: 2 and over 0.476*** (0.090) Screen size: 21 to 32 inches 0.316** (Reference= 21 inches and below) (0.034) Screen size: 32 inches and over 0.658*** (0.059) Network:GSM 1.669*** (Reference=CDMA) (0.240) Network: TDS-CDMA 0.823*** (0.158) Constant -5.243*** -2.432*** -8.418*** (0.247) (0.243) (0.461) N 17914 12432 46741 R2 0.487 0.850 0.598 Standard errors in parentheses *=p < 0.1, **= p < 0.05, ***= p < 0.01.Mariko Watanabe Competitive Neutrality JEA, 2017 18 / 24
  19. 19. Positioning by Ownerships Air Conditioner (unit RMB ) Consumer Surplus Benefit Price F-P -128 1431*** 1559*** F-S 259 1264*** 1005*** P-S 387*** -166 -553*** CTV unit: RMB Consumer Surplus Benefit Price F-P 4352*** 8532*** 4180*** F-S 4190*** 8138*** 3948*** P-S -162 -393 -232 Mobile phone unit: RMB Consumer Surplus Benefit Price F-P -735*** 243*** 980*** F-S -237*** 348*** 587*** P-S 498*** 104 -393*** Standard errors were not displayed. *= p < 0.1, **= p < 0.05, ***=p < 0.01 Mariko Watanabe Competitive Neutrality JEA, 2017 19 / 24
  20. 20. WTP-Price curve : Air Conditioner 1 Mariko Watanabe Competitive Neutrality JEA, 2017 20 / 24
  21. 21. WTP-Price curve : Air Conditioner 2 Mariko Watanabe Competitive Neutrality JEA, 2017 21 / 24
  22. 22. WTP-Price curve : CTV Mariko Watanabe Competitive Neutrality JEA, 2017 22 / 24
  23. 23. WTP-Price curve : Mobile phone Mariko Watanabe Competitive Neutrality JEA, 2017 23 / 24
  24. 24. Price Benefit Supply Curve - CTV market (1) Hard Constraint (2) Soft budget constraint OLS OLS ln priceconstraint ln pricesoftbudget ln benefitown 4.527*** 6.354*** (0.000) (0.000) ln benefitothers -3.995*** -6.127*** (0.000) (0.000) ln mcsoftbudget 0.097 0.277*** (0.163) (0.000) ln mcconstraint 0.308*** 0.016 (0.000) (0.609) ln debtown -0.047*** (0.000) ln debtrivals 0.076 (0.496) constant -3.466 4.589*** (0.264) (0.000) N 5734 6377 R2 0.709 0.709 p-values in parentheses * p < 0.1, ** p < 0.05, *** p < 0.01 (Note) Marginal costs (mc) are computed from the equation: pjt − mcjt = −qjt ∂pjt ∂qjt ∂pjt ∂qjt is estimated from demand estimates in previous setion. Mariko Watanabe Competitive Neutrality JEA, 2017 24 / 24
  25. 25. Summary Current work has NOT yet incorporate supply side model. Under construction. However, demand analysis provided several interesting factors. 1 WTP-Price Map can describe “competitive position”. The maps showed us SOE, Private takes “cost advantage position’ FE takes “benefit, differentiated advantage position” Following development, WTP-price curves got horizontal. In CTV market, WTP got shrink, although price kept low. 2 Price Subsidy function regression implies existence of soft budget constraint Price set by Soft budget SOE get lower as their debt/subsidy is large. Mariko Watanabe Competitive Neutrality JEA, 2017 25 / 24

2017年日本経済学会での報告スライド。

Views

Total views

64

On Slideshare

0

From embeds

0

Number of embeds

0

Actions

Downloads

0

Shares

0

Comments

0

Likes

0

×