Measuring Potential Collusion: Japan’s Oligopolistic Tire Market – Guest Lecture from the Yokohama National University

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Measuring Potential Collusion: Japan’s Oligopolistic Tire Market – Guest Lecture from the Yokohama National University

On Thursday (25/7), the Postgraduate Program in Economics (PPIE) organized a guest lecture entitled “Measuring Potential Collusion: Japan’s Oligopolistic Tire Market.” Prof. Craig Parsons from Yokohoma National University was the speaker at this session. His research field includes Empirical Trade, Applied Econometrics, Empirical Industrial Organization, Energy Economics, and International Economics. Before the lecture began, the entire audience got a copy of a paper titled “The Japanese Automobile Tire Industry under Scrutiny.” written by Prof. Craig Parsons and others. The lecture then commenced with opening remarks given by the Chair of the Postgraduate Program in Economics (PPIE), Ir. Sugiharso Safuan, M.E., Ph.D.

Prof. Craig Parsons first explained the highly concentrated market condition in Japan tire market. The Japan Fair Trade Commission had founded collusion for Japan Defense Agency bidding for the procurement of automobile tires between four biggest firms.

He then pointed out various methods of measuring competitiveness. HHI (Herfindahl-Hirschman Index) and Price-cost Margin are one of the popular measures of competitiveness. However, a method such as Relative Profits Measure or RPM developed by Boone van Ours has given a new approach to estimate competitiveness. RPM assumes that a market will be heterogeneous if it has a different level of efficiency and firms that differ in terms of efficiency, will have a different level of profit.

Lastly, Prof. Craig Parsons explained the results of his research on the Japanese tire industry. Using the HHI index and calculation of concentration ratios, the market has a high level of concentration. However, the RPM method suggests that there is competitive behavior between companies.

The lecture was closed with a QnA session. Hopefully, this lecture can give us insight into the perspective of market competition, as well as the application for Indonesia market condition. We thank Prof. Craig Parsons for coming and sharing this valuable knowledge to us.

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