Degree of monopoly and market power vs. price flexibility in Polish economy: empirical analysis based on COICOP classification

Authors

DOI:

https://doi.org/10.24136/oc.2020.001

Keywords:

degree of monopoly, market power, price rigidity, COICOP, Poland

Abstract

Research background: The issue of price flexibility is crucial in the economy both in the aspect of company theory and its macroeconomic consequences. In a number of publications, the sources of variable price flexibility are linked to the market power of enterprises as well as the market structure that has developed in a given branch. It is difficult to indicate empirical studies that would state clearly whether price flexibility depends on the degree of monopoly or the market power of enterprises. This paper concerns that particular field of study.

Purpose of the article: The purpose of the paper is to present the statistical dependence of the degree of monopoly and market power vs. price flexibility in the economy.

Methods: The analysis has been conducted using aggregated data concerning Polish economy in the period from 2001 to 2013, based on COICOP. The degree of monopoly indicator was the average number of companies in a given branch, following the classical models of market structures; the market power indicator was the average net revenue from sales of products per enterprise representing a given branch; the measure of price flexibility was the probability of price variation estimated using the Calvo pricing model. It is, therefore, a frequency-based approach to price flexibility. Statistical dependence was analyzed using the Spearman's rank and Kendall?s tau correlation coefficient and simple regression models.

Findings & Value added: The outcomes indicate that in the case of Poland in the analyzed period there is no statistically significant relation between the degree of monopoly and price flexibility and also between the market power and price flexibility. Thus, the findings of the analysis support the studies which reject the assumption that higher degree of monopoly or higher market power of an enterprise is followed by less flexible prices.

Downloads

Download data is not yet available.

References

Alvarez, L. J., Burriel, P., & Hernando, I. (2010). Price-setting behaviour in Spain: evidence from micro PPI data. Managerial and Decision Economics, 31. doi: 10.1002/mde.1496. DOI: https://doi.org/10.1002/mde.1496
View in Google Scholar

Bils, M., & Klenow, P. J. (2004). Some evidences on the importance of sticky prices. Journal of Political Economy, 112(5). doi: 10.1086/422559. DOI: https://doi.org/10.1086/422559
View in Google Scholar

Blinder, A. S. (1991). Why are prices sticky?: preliminary results from an interview study. American Economic Review, 81(2). DOI: https://doi.org/10.3386/w3646
View in Google Scholar

Blinder, A. S., Canetti, E. R. D., Lebow, D. E., & Rudd, J. B. (1998). Asking about prices: a new approach to understanding price stickiness. Russell Sage foundation: New York.
View in Google Scholar

Calvo, G. A. (1983). Staggered prices in a utility-maximizing framework. Journal of Monetary Economics, 12. doi: 10.1016/0304-3932(83)90060-0. DOI: https://doi.org/10.1016/0304-3932(83)90060-0
View in Google Scholar

Carlton, D. W. (1986). The rigidity of prices. NBER Working Paper Series, 1813. DOI: https://doi.org/10.3386/w1813
View in Google Scholar

Central Statistical Office (2014). Classification of individual consumption by purpose worked out for the needs/ Harmonized indices of consumer prices. Retrieved form http://old.stat.gov.pl/gus/5840_2892_PLK_HTML.htm (25.04.2014).
View in Google Scholar

Coricelli, F., & Horvath R. (2010). Price setting and market structure: an empirical analysis of micro data in Slovakia. Managerial and Decision Economics, 31. doi: 10.1002/mde.1480. DOI: https://doi.org/10.1002/mde.1480
View in Google Scholar

Cornille, D., & Dossche, M. (2008). Some evidence on the adjustment of producer prices. Scandinavian Journal of Economics, 110(3). doi: 10.1111/j.1467-9442.2008.00548.x. DOI: https://doi.org/10.1111/j.1467-9442.2008.00548.x
View in Google Scholar

Dias, D. A., Marques, C. R., Martins, F., & Santos Silva, J. M. C. (2015). Understanding price stickiness: firm-level evidencs on price adjustment lags and their asymmetries. Oxford Bulletion of Economics and Statistics, 77(5). doi: 10.1111/obes.12083. DOI: https://doi.org/10.1111/obes.12083
View in Google Scholar

Dhyne, E., Konieczny, J., Rumler, F., & Sevestre, P. (2009). Price rigidity in the euro area – an assessment. European Economy, Economic Papers, 380. doi: 10.2765/38763
View in Google Scholar

Fabiani, S., Druant, M., Hern, I., Kwapil, C., Martins, F., Mathä, T., Sabbatini, R., Stahl, H., & Stokman, A. (2005). The pricing behaviour of firms in euro area: New survey evidence. European Central Bank Working Paper, 535. DOI: https://doi.org/10.2139/ssrn.825628
View in Google Scholar

Gautier, E. (2008). The behaviour of producer prices: evidence from French PPI micro-data. Empirical Economics, 35(2). doi: 10.1007/s00181-007-0160-3. DOI: https://doi.org/10.1007/s00181-007-0160-3
View in Google Scholar

Hall, R. L., & Hitch, C. J. (1939). Price theory and business behaviour. Oxford Economic Papers, 2. DOI: https://doi.org/10.1093/oxepap/os-2.1.12
View in Google Scholar

Hall, S., Walsh, M., & Yates, A. (1997). How do UK companies set prices? Bank of England Working Paper, 67. DOI: https://doi.org/10.2139/ssrn.114948
View in Google Scholar

Hall, S., Walsh, M., & Yates, A. (2000). Are UK companies’ prices sticky? Oxford Economic Papers, 52(3). doi: 52.3.425. DOI: https://doi.org/10.1093/oep/52.3.425
View in Google Scholar

Jankiewicz, Z., & Kołodziejczyk, D. (2008). The Price-setting Behaviour of Polish Firms. Comparison Between the Euro Area and Poland. Bank i Kredyt, 39(2).
View in Google Scholar

Macias, P., & Makarski, K. (2013). Stylizowane fakty o cenach konsumenta w Polsce. Materiały i studia NBP, 295.
View in Google Scholar

Marques, C. R., Martins, F., Dias, D. & Santos Silva, J. M. C. (2011). Why are some prices stickier than others? Firm-data evidence on price adjustment lags. Working Papers, 7.
View in Google Scholar

Means, G. (1972). The administered-price thesis reconfirmed. American Economic Review, 62(3).
View in Google Scholar

Samuels, W. J., & Medema, S. G. (1989). Gardiner C. Means’s institutional and post-Keynesian economics. Review of Political Economy, 1(2). doi: 10.1080/ 09538258900000014 DOI: https://doi.org/10.1080/09538258900000014
View in Google Scholar

Sabbatini, R., Fabiani, S., Gatulli, A., & Veronese, G. (2005). Producer price behaviour in Italy: evidence from micro PPI data. Banca d’Italia, Unpublished paper.
View in Google Scholar

Stigler, G., &Kindahl, J. (1970). The behaviour of industrial prices. NBER.
View in Google Scholar

Umiński, P., Market structure and market power in selected sectors of the Polish economy based on COICOP classification. Paper in review.
View in Google Scholar

Vermeulen, P., Dias, D. A., Dossche, M., Gautier, E., Hernando, I., Sabbatini, R., & Stahl, H. (2012). Price setting in the Euro area: some stylized facts from individual producer price data. Journal of Money Credit and Banking, 44(8). doi: 10.1111/j.1538-4616.2012.00547.x. DOI: https://doi.org/10.1111/j.1538-4616.2012.00547.x
View in Google Scholar

Wallusch, J. (2007). Elasticity of consumer prices in Poland. Ruch Prawniczy, Ekonomiczny i Socjologiczny, 4.
View in Google Scholar

Weiss, L.W. (1977). Stigler, Kindahl, and Means on administered prices. American Economic Review, 67(4).
View in Google Scholar

Downloads

Published

31-03-2020

Issue

Section

Articles

How to Cite

Umiński, P. (2020). Degree of monopoly and market power vs. price flexibility in Polish economy: empirical analysis based on COICOP classification. Oeconomia Copernicana, 11(1), 11-28. https://doi.org/10.24136/oc.2020.001

Similar Articles

21-30 of 244

You may also start an advanced similarity search for this article.