M. Shamsoddini; M.N. Shahikitash; F. Khodadad Kashi
Abstract
Introduction: The significance of asymmetric information in determining market functions and explaining complexities is undeniable. Asymmetric information can strongly affect firms' performance in Stock Exchange, and can make firms with poor informational environment unattractive for investors. Therefore, ...
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Introduction: The significance of asymmetric information in determining market functions and explaining complexities is undeniable. Asymmetric information can strongly affect firms' performance in Stock Exchange, and can make firms with poor informational environment unattractive for investors. Therefore, trying to reduce asymmetric information can have an important effect on performance in Stock Exchange. Food and beverage firms in Tehran Stock Exchange have not been successful in attracting traders. This may be partially caused by the informational environment of these firms in market.
Materials and Methods: This study aims to measure asymmetric information among active firms in the food and beverages industry in Tehran Stock Exchange between 2008 and 2015. Researchers have developed measures to determine the level of information asymmetry because is not directly observable. These measures fall into three categories (Clarke and Shastri, 2000). The first category uses measures based on growth opportunities and argues that firms with more growth opportunities have a symmetrical information environment. The second category uses measures based on predicted profit and argues that an increase in the level of a firm's information leads to convergence of expectations of that firm's future profits. The third category uses a series of measures based on market microstructure literature that are commonly compared with other categories. In doing so, we use Probability of Informed Trading (PIN) which is a modern index for measuring asymmetric information (third category). Easley and O'Hara (1992) offer a model of unusual order flow in the market, based on which one can estimate the probability of a random trading by an informed trader; higher values of PIN (in the range of 0 to 1) indicate more confidential information or higher levels of asymmetric information. The basic assumption of this model is that general information is reflected in prices directly and without the need for trading activity, while confidential information is reflected during unusual orders (surplus orders to buy or sell).
Results and Discussion: In order to conduct a better analysis, the results of PIN index are provided in two parts: (1) food and beverage firms excluding those in the sugar industry and (2) firms in the sugar industry. Results show high asymmetric information in these firms. A review of PIN results shows a wide range of numbers between 0 and 1, but more numbers are close to 1, indicating high asymmetric information. Of course in some years and some firms this index is very close to zero, which means in some cases asymmetric information is very small and in most cases asymmetric information is relatively high. For instance, in the first group of firms, on average symbols MRAM1, SBEH1 and GBEH1 have lowest PIN index: values for first and second firms are approximately 0.26, and for third firms is 0.29. It is important to note that the lowest PIN values for active firms in this industry (0.26) shows high asymmetric information. Also, considering the same group of firms, symbols NOSH1, SLMN1 and CHCH1 have the highest PIN index, approximately equal to0.99; this means almost full asymmetric information. In sugar industry's firms, symbols SHKR1, GPSH1 and GESF1 have lowest PIN index, that PIN values for these firms are 0.31, 0.35 and 0.39 respectively. Also symbols GLOR1, GSHI1 and GNJN1 have the highest PIN indexes, equal to 0.62, 0.56 and 0.54, respectively. Overall, firms in the sugar industry have better informational environment compared to their other food and beverage firms.
Conclusions: On average, the highest coefficient of asymmetric information in food products and beverages industry belongs to 2008 and the lowest coefficient occurred in 2015, when asymmetric information in the surveyed firms was reduced. This may be the result of two events. Increased informational level of traders in market and more good news which improved the traders' expectations of future investment in Tehran Stock Exchange. Positive political events had a great role in this case. In general, PIN values had a direct relationship with instabilities in Tehran Stock Exchange. Also, it is important to note that the food and beverages industry is a relatively small industry in Tehran Stock Exchange, and it is natural that it does not have a great success to attracting capital flow. However, food and beverage firms in Tehran Stock Exchange should try to reduce their asymmetric information to be able to earn better growth in the market.
M.N. Shahikitash; Z. Sheidaii; A. Mohammadzadeh
Abstract
Date is as one of the important items of the agricultural production in Iran as Iran's share of global production was 14.1% in 2012 and rank of production increased to second in the world too. In recent years, price uncertainty in date market has increased due to changes in government policies on date ...
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Date is as one of the important items of the agricultural production in Iran as Iran's share of global production was 14.1% in 2012 and rank of production increased to second in the world too. In recent years, price uncertainty in date market has increased due to changes in government policies on date prices pattern, from a guaranteed buying pattern to negotiated price pattern. According to the importance of this industry in the country and issues that are always in marketing and market making of agricultural products in developing countries, This paper seeks to measure marketing margins in the industry due to the product's market power and price volatility, and to achieve this goal, the main idea of this paper based on the study Brorsen et al (11). This paper provides a conceptual and empirical framework for analyzing marketing margins in a date market facing output price uncertainty in Iran. Present study evaluated marketing margins into component reflecting the marginal cost of the processing industry, oligopoly price distortions, and an output risk component. The empirical finding is that, while marketing margin is about 33%, the coefficient for oligopoly is more than the coefficient for oligopsony. In the other words, there is an asymmetric monopoly power among buyers and sellers, Also the estimated coefficient for price risk based on exponential GARCH approach indicates, this factor would affect the marketing margin about 7 percent, if all other factors remain constant.
M.N. Shahikitash; E. Gholipoorbolasi; A. Mohammadzadeh
Abstract
Introduction: Food processing industries are one of the major industrial groups in developing countries which play an important role in the economic development of these countries. With the Developed and Developing Food Industry on the other hand, food security and providing food are very important in ...
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Introduction: Food processing industries are one of the major industrial groups in developing countries which play an important role in the economic development of these countries. With the Developed and Developing Food Industry on the other hand, food security and providing food are very important in each country.
In an overview, markets are divided into two groups: The first group is a market with perfect competition. And second group is markets with monopoly structure.One of the important features of markets that determine its type is the ability of the firms in the pricing and determiningof the amount of production. If the firms do not have any effect on these two factors, themarket has perfect competition.If the firms have the ability to influence price of productions, this market is non-competitive and a concept called market power emerges.In general, not only market power is the ability of firm in determination of price above the competitive situation, but also it does not let its share of sale to decrease. The existence of collusion in markets can makethem distantfrom perfect competition and make them incomplete. In economics and particularly in industrial organization, market power is the ability of a firm to profitably raise the market price of a good or service over marginal cost. In perfect competitive markets, market participants have no market power. A firm with total market power can raise prices without losing any customers to competitors. Firms that have power to set price are referred to as "price makers" or "price setters", while those without itare sometimes called "price-takers". Significant market power occurs when prices exceed marginal cost and the long run average cost, so the firm makes economic profits. A firm with market power has the ability to individually affect either the total quantity or the prevailing price in the market. Price makers face a downward slopingdemand curve, such that increases in price leads to a lower quantity of demand. The decrease in supply as a result of the exercise of market power creates an economic deadweight loss which is often viewed as socially undesirable. As a result, many countries have anti-trustor other legislation to limit the ability of firms to create market power. Such legislation often regulates mergers and sometimes introduces a judicial power to compel divestiture. A firm usually has market power by virtue of controlling a large portion of the market. In extreme cases—monopoly and monopsony—the firm controls the entire market. However, market size alone is not the only indicator of market power. Highly concentrated markets may be contestable if there are no barriers to entry or exit, limiting the incumbent firm's ability to raise its price above competitive levels.
Market power gives firms the ability to engage in unilateral anti-competitive behavior.[1] Some of the behaviors that firms with market power are accused of engaging in include predatory pricing, product tying, and creation of overcapacity or other barriers to entry. If no individual participant in the market has significant market power, then anti-competitive behavior can take place only through collusion, or the exercise of a group of participants' collective market power. The Lerner index and Herfindahl index may be used to measure market power.
Examination of market power of different industries provides possibility that policymakers design and deliver model for processing food and beverage producers to guide them to the product that has the most social benefits.
Materials and Methods: The main purpose of this study is to assess and identify market structure and market power and estimate coefficient of collusion in the food and beverage industry. Estimates of market power in the food and beverage industry in Iran are few when compared with similar studies overseas. For local studies we can cite papers such as Alijani&Sabuhi (4), Sheikh zeinodin&Bakhshude (3), Safdarhoseiniet all (2), Mazhari&Yazdani. Yet,foreign studies conducted in this area are varied in different sectors. For example, the studies Angelini&cetorell (15) andRezitis (24) in the banking system can be mentioned.Of the other foreign studies Leo (21), Bresnahan (12), Abayasiri (8), Boyle & Hall (14), Saitone& etal. (25), Koontz (20), Duravall (17), Steen (29), Salhofer and etAl. (28), Allender (10), Siton and et al. (25), Rigoberto et all (22), Lopez & etal. (22), Oustapassidis& etal. (23) can be cited. The model in this paper to estimate market power used for the food and beverage industries has been developed by Bresnahan& Leo. In this model,by considering demand and supply market powercan be investigated. In the next step, marginal cost (cost function is Translog cost) and marginal revenue will be obtained. In the final step,by estimatingthe final equation market power can be calculated. The type of industrial classification used in this study is the International Standard Industrial Classification (ISIC). This kind of classification is widely used for empirical studies because of lack of industrial data on the basis of other classifications. We use firm level data aggregated to the4- digit ISIC code of industries. The purpose of this study is to estimate the market structure and market power of the food and drink industry in Iran.For estimating market power, conjectural variation is used. Results and DiscussionIn oligopoly theory, conjectural variation is the belief that one firm has about the way its competitors may react if it varies its output or price. The firm forms a conjecture about the variation in the other firm's output that will accompany any change in its own output. For example, in the classic Cournot model of oligopoly, it is assumed that each firm treats the output of the other firms as given when it chooses its output. This is sometimes called the "Nash conjecture" as it underlies the standard Nash equilibrium concept. However, alternative assumptions can be made. Suppose you have two firms producing the same good, so that the industry price is determined by the combined output of the two firms (think of the water duopoly in Cournot's original 1838 account). Now suppose that each firm has what is called the "Bertrand Conjecture" of −1. This means that if firm A increases its output, it conjectures that firm B will reduce its output to exactly offset firm A's increase, so that the total output and hence price remain unchanged. With the Bertrand Conjecture, the firms act as if they believe that the market price is unaffected by their own output, because each firm believes that the other firm will adjust its output so that total output will be constant. At the other extreme is the Joint-Profit maximizing conjecture of +1. In this case each firm believes that the other firm will imitate exactly any change it makes in output, which leads (with constant marginal cost) to the firms behaving like a single monopoly supplier. The results show that it is significant uncompetitive pattern for 18 of the 19 industries. Existence of oligopoly industry for 12 shows the non-competitiveness of this industry. The flour and cereals production industry has 2.24 degrees of collusion and the tea industry has 2.14 degrees of collusion. Degree of conjectural variation is between 0.43 and 2.24. These numbers are related to carbonated soft drinks industry and production of flour and cereals.
Conclusion: This paper discusses the Market Structure and the Degree of Market Power and Collusion Index of Food and Beverage industry on the basis of Modern Industrial Organization (NEIO) with Bresnahan- Leo (1982) Approach. For this Purpose, data of ISIC Four- Digit Code is used to investigate the 19 industries for the years 2005-2011. The result showsthat competitive conditions for 18 Industriesaresignificant. The degree of Market Power is between 0.43 and 2.24.12.The industry has Oligopolistic Market and Production of Oil and Fat Industry has a Monopoly Market close to perfect. Conjectural Variation for the Industry of Flour and Tea isvery high, with 2.42 and 2.14, respectively. Except malt and alcohol-free beer industry, uncompetitive model is significant for other industries. In summary, industries with a high degree of collusion will include: processing and preserving of fruit, sugar production, bakery, livestock slaughtering and poultry. Industries with a low degree of collusion will include: production of animal and vegetable oils and fats, tea making, producing Malt and alcohol free beer. Industries that follow Cournot Model will include tea making. Industries with coefficient of collusion between 2 and 5 will include: processing and preserving of fish, dairy products, animal feed production and the production of sugar, bakery, bread, pastries, biscuitsand soft drinks. Industries with a competitive model will include date palm sorting.
M. Nabishahyakitash; A. Mohammadzadeh
Abstract
In this paper, we investigate Conjectural Variations elasticity in Iranians Food and Beverage industry using Iwata approach, The conjectural variation function is extracted from demand and supply information also optimization process on producers’ behavior. The experimental estimates of conjectural ...
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In this paper, we investigate Conjectural Variations elasticity in Iranians Food and Beverage industry using Iwata approach, The conjectural variation function is extracted from demand and supply information also optimization process on producers’ behavior. The experimental estimates of conjectural variation elasticities were obtained based on price elasticity of demand, cost elasticity and marginal cost elasticity for the selected industries. In this research demand function AIDS was used to obtain the price elasticity. The AIDS function was estimated using SUR and the demand price elasticity is calculated by calfent. The results show that "Vegetable oils and animal" industry with 19.37 have the most conjectural variation elasticity among the selected industries (The more divergent the conjectural variation elasticity is from zero the more likely the monopoly exists). In addition, dairy, sugar and malt industries have the most conjectural variation elasticity with 18.01, 17.18, and 10.51 respectively.
A. Dehghani; B. Ashrafi; M.N. Shahikitash; M. Ameri
Abstract
The main purpose of this paper is to investigate the impact of trade openness on the Employment and the real Wage for the Iranian Food and Beverage Industries over the year 2007. For this purpose in this study, the ratio of export to Production Value has been considered as a proxy for trade openness ...
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The main purpose of this paper is to investigate the impact of trade openness on the Employment and the real Wage for the Iranian Food and Beverage Industries over the year 2007. For this purpose in this study, the ratio of export to Production Value has been considered as a proxy for trade openness and the main model has been estimated using a Dynamic Panel Data (DPD) approach. The main findings of this study indicate that the trade openness has positive and significant effect on the employment and the real wage in the Iranian Food and Beverage Industries. Moreover, output value and real wage have positive and significant effect on the employment. Hence, the main recommendation of this paper to policy makers is to expand the food and beverage exports for improvement of employment and real wage in the Iranian Food and Beverage Industries.