Barriers to Retail Competition and Prices: Evidence from Spain

Alexander W. Hoffmaister ()

No 06/231, IMF Working Papers from International Monetary Fund

Abstract: Why do prices in Spain's regions fail to converge? The prime suspects for this puzzling result are differences in regional barriers to entry in retail distribution. This paper develops a Cournot-Nash model of imperfect competition to illustrate the effect of barriers on prices. A unique data set-derived from an extensive analysis of competition policies in Spain- provides evidence that barriers to entry increase regional prices. The evidence also suggests that, consistent with the model's predictions, barriers to entry raise prices up to a point, and thus indicate that barriers have a threshold effect on prices.

Keywords: Barriers to entry; Cournot-Nash model; regulation in goods markets; and panel cointegration; Competition; Spain; Markets; Prices (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
Date: 2006-10-20
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