ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Competition in Deregulated Markets

Although the paper "Competition and Monopoly in Indian Cotton Seed Market" (15 September 2007) is a good attempt at identifying some of the dynamics of the industry, the authors do not provide any explicit theoretical framework for analysing competition.

DISCUSSIONjanuary 10, 2009 EPW Economic & Political Weekly60Competition in Deregulated MarketsK V Bhanu Murthy, Ashis Taru DebK V Bhanu Murthy (bhanumurthykv@yahoo.com) is at the Commerce Department, Delhi School of Economics and Ashis Taru Deb (Ashishtaru@sify.com) is with the College of Vocational Studies, Delhi University.Although the paper “Competition and Monopoly in Indian Cotton Seed Market” (15 September 2007) is a good attempt at identifying some of the dynamics of the industry, the authors do not provide any explicit theoretical framework for analysing competition.Of late, we have come across a few studies on competition in deregu-lated markets. Such studies are welcome as they attempt to grapple with the complex issue of competition. The paper titled “Competition and Monopoly in Indian Cotton Seed Market” (EPW, 15 September 2007) by Murugkar, Rama-swami and Shelar (hereafterMRS) is one such study. Since we have been working in the area for some time and since the study byMRS is sponsored by the International Food Policy Research Institute, we have chosen to examine the paper and make some critical comments.The paper is a good attempt at identify-ing some of the dynamics of the industry by referring to the changes in market leaders before and after entry. The most significant contribution of the study lies in the description of the peculiarities of the cotton seed market in India. However, it does not help other researchers to under-stand competition either in general or in some other market. In any analysis of competition, one would expect the follow-ing components to be present: (i) A con-ceptualisation of competition, given the plethora of literature on the notion of competition; (ii) the theoretical frame-work underlying such a concept; (iii) a modification of the framework to suit the particular industry; (iv) measurement of the phenomenon of competition using the concept and framework; and (v) a model analysing competition in the said industry going through deregulation.Unless any study that purports to ana-lyse competition incorporates all, or at least some of the above, it does not do jus-tice to the study of competition. The study byMRS is found wanting in all the above aspects, except for some rudimentary measures like Herfindahl’s concentration ratio and the analysis of market leaders through the ranks of leading firms. There exists well-established literature on competition that calculates mobility and turnover to quantify rivalry. There are attempts made by Heggestad and Rhoades (1976), Denizer (1997) and Bod-enhorn (1990). But such measures of rivalry were not used byMRS. We (Murthy and Deb 2007b) have extended these ap-proaches to formalise a measure of com-petition. Our formulation uses the Boden-horn’s measure of rivalry and argues that such a measure of the phenomenon is indicative of competition. In doing so it operationalises competition. Our paper develops a model to analyse competition in the private banking industry that has undergone deregulation. We also estimate the model of competition and successfully explain the determinants of competition. Finally, we are able to identify the market form with the help of our overall approach and methodology.Apparently no concept in economics is as hazy as competition. The concept has gone through a very complicated process of evolution in the history of economic thought. During the process of evolution, the concept got mixed with other notions, and any attempt to understand the true essence of competition has been rendered difficult. A few reviews of the concept, which remained confined to only selected interpretations of competition cut across each other.Since the above pursuit is too vast and complicated for the confines of a single paper, we have written a paper that critically reviews the conceptual and theoretical background of competition (Murthy and Deb 2007a). Our study is based on the theoretical framework of the structure-conduct-performance (SCP) par-adigm. In the current scenario of deregu-lation, it becomes imperative to under-stand critically the notion of competition. Any serious researcher on competition has to squarely address this issue, irrespective of the level of complexities involved. It is quite natural that we should know the concept of competition properly, before we make an attempt to make policy recommendations. Even the Competition Commission of India, with all its expertise did not provide

such a layman’s definition, “competition in the market means sellers striving independently for buyers’ patronage to maximise profit (or other business objectives)”. It is not very clear how competition policy will “promote and sustain competition” without rigorous concept of competition, which is capable of being opeartionalised. Policy pronouncement in the absence of adequate economic input is going to be far from perfect. This has led Bhattacharya (2003) to plead for a greater economic i nput into the formulation and enforcement of competition policy.

Dear reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Comments

(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top