The Structure of Monopoly Power on Saint Petersburg Real Estate Market: a View from IO

Student: Chermoshentsev Evgenii

Supervisor: Philip Ushchev

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Applied Economics and Mathematical Methods (Master)

Year of Graduation: 2018

We analyze the pricing of real estate developers in Saint Petersburg in order to find the difference between big and small firms, using a combination of spatial lag and threshold models. The results of our analysis show strong empirical evidences that market structure heavily depends on proximity to subway. Being enough close to subway station firms act according to monopolistic competition model. While far from subway the pricing pattern looks like oligopoly and prices are strategic complements. That means that strategic power vanishes in the vicinity of subway stations. Nevertheless, big firms charge higher prices in all cases. Our results also confirm that strategic power is connected to size: small firms have almost zero influence on big firms pricing decision.

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