• Login
  • Register
  • Search

How Does Market Share Impacted Oil Oligopoly Firms’ Profits Volatility Under the Price Shock?

Tianyuan Xie

Abstract


This paper aimed to identify how the oligopoly firms’ market shares related to the profit stand ability. I selected firms from oil industry, which is widely recognized as oligopoly market, as an example and see if higher market share will stabilized firms profits in the face of oil price shock in 2020, caused by both global pandemic Russia–Saudi Arabia oil price war. I found that in the long-run, the firm’s market share is negatively correlated with firms’ profit volatilities. However, large firms’ profits fluctuates more in this price shock compared to small firms’ profits. Reasons might be small firms from my samples are more from OPEC countries which are less impacted by this price shock. Also, the price shock prices brought more business uncertainties for big oil companies than for small ones in both stock prices and other factors. This account for higher profit fluctuation for the large oil firms.


Keywords


Oligopoly; Market Share; Oil Industry; Profitability

Full Text:

PDF

References


Al Rousan, Sbia, R., & Tas, B. K. O. (2018). A dynamic network analysis of the world oil market: Analysis of OPEC and non-OPEC members. Energy Economics, 75, 28–41. https://doi.org/10.1016/ j.eneco.2018.07.032.

Amiti, Itskhoki, O., & Konings, J. (2019). International Shocks, Variable Markups, and Domestic Prices. The Review of Economic Studies, 86(6), 2356–2402. https://doi.org/10.1093/restud/rdz005.

Asker, Collard-Wexler, A., & De Loecker, J. (2019). (Mis) Allocation, Market Power, and Global Oil Extraction. The American Economic Review, 109(4), 1568–1615. https:// doi.org/ 10.1257/ aer.20171438.

Belleflamme, PM., & Toulemonde, E. (2022). The tension between market shares and profit under platform competition. International Journal of Industrial Organization, 81, 102807–. https://doi.org/10.1016/j.ijindorg.2021.102807.

Caves, & Porter, ME. (1978). Market Structure, Oligopoly, and Stability of Market Shares. The Journal of Industrial Economics, 26(4), 289–313. https://doi.org/10.2307/ 2098076.

Choe. (2002). Differential impacts of oil price shock on small vs. large firms as a source of real effect on the economy. ProQuest Dissertations Publishing.

Fattouh, B. (2020, April). Oil Benchmarks Under Stress. Oxford; The Oxford Institute for energy study.

Fratzscher, M., Schneider, D., & Robays, I. Y. (2014, July). Working Paper Series - European Central Bank. Oil Prices, Exchange Rates and Asset Prices. Retrieved May 12, 2022, from https://www. ecb. europa.eu/pub/pdf/scpwps/ecbwp1602.pdf.

In, Kim, S., & Yoon, J. H. (2002). International Stock Market Linkages: Evidence from the Asian Financial Crisis. Journal of Emerging Market Finance, 1(1), 1–29. https://doi.org/ 10.1177/ 097265270200100102.

Mary A., Oleg I., Jozef, K., International Shocks, Variable Markups, and Domestic Prices, The Review of Economic Studies, Volume 86, Issue 6, November 2019, Pages 2356–2402, https:// doi.org/10.1093/restud/rdz005.

OilPrice.com. (2022, April 1). Oil price charts. OilPrice.com. Retrieved April 4, 2022, from https://oilprice.com/oil-price-charts/.

Sato. (2021). Market shares and profits in two-sided markets. Economics Letters, 207, 110042–. https://doi.org/ 10.1016/ j.econle t.2021.110042.

Wang, MF., Niu, T., & Liang, C. (2021). The importance of extreme shock: Examining the effect of investor sentiment on the crude oil futures market. Energy Economics, 99, 105319–. https:// doi.org/10.1016/j.eneco.2021.105319. Note: Due to the limitation of space, the data not shown in the article are from relevant websites, if necessary, please contact the author directly.




DOI: http://dx.doi.org/10.18686/fm.v7i2.4389

Refbacks