Demand estimation, relevant market definition and identification of market power in Turkish Beverage Industry

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2010
Kalkan, Ekrem
This dissertation aims to contribute to the field of economics of competition policy by analyzing the demand structure and the market power in the Turkish beverage industry and in the cola market in particular. First, a demand system for the beverage products has been estimated by using a multi-stage linearized Almost Ideal Demand System (AIDS). Using the own-price elasticity of cola in a SSNIP test (Small but Significant Non-Transitory Increase in Price), it is shown that cola market consists of a distinct relevant product market. Then, the demand elasticities of cola products at brand and package level have been estimated by the simple and nested logit models. Finally, the estimated demand elasticities of cola products have been used in measuring the degree of market power and predicting the effects of a hypothetical merger between Pepsi and Cola Turca by using a merger simulation technique. The results show that all cola suppliers have large price-cost margins for most of their products. Prices of the merging parties increase in average by 15 - 21% after the merger. The merger also causes the market price to increase by 16- 22% and consumer surplus to decrease by nearly 5% in average. Finally, depending on these results, the thesis recommends a stricter merger control criterion than dominance criterion for competition policy in Turkey.

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Citation Formats
E. Kalkan, “Demand estimation, relevant market definition and identification of market power in Turkish Beverage Industry,” Ph.D. - Doctoral Program, Middle East Technical University, 2010.