Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 84: Competition in Interrelated Markets: An Empirical Study

Marcus Asplund and Rickard Sandin
Additional contact information
Marcus Asplund: Department of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Rickard Sandin: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden.

Abstract: This paper studies competition in small, concentrated and inter- related markets. Our data set consists of price information fron 543 driving schools in 250 local markets in sweden, which gives a large sample to test hypotheses on how market structure influences competition. The results show that if prices in nearby markets are low, and the distances to them are short, it reduces prices, as suggested in models of spatial competition. Moreover, we find that prices in closely located markets are interdependent. It is also shown that prices are increasing in firm concentration within a market, as most theories of oligopoly predict.

Keywords: Spatial competition; interrelated markets; oligopoly; driving schools

JEL-codes: C24; C31; D43; L13; L84; R32

27 pages, November 1995

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