non monotonic effects of market concentration on prices for residential solar photovoltaics in the united states abstract emerging renewable energy markets may become more concentrated over time as the most efficient firms accumulate market share the effects of this market concentration on prices are tested using a rich dataset of residential solar photovoltaic pv systems in the united states a novel hypothesis is explored that the effects of market concentration may be non monotonic prices may decline in market concentration due to efficiency gains associated with returns to scale but increase in concentration in already concentrated markets due to increasing market power the results of an econometric model provide evidence to support the non monotonic hypothesis however the data suggest that the relationship between prices and firm scale is nuanced and that both large and small scale pv installers may wield efficiency advantages

product differentiation and profitability an asymmetric model the purpose of this paper is to develop a model of product differentiation in which there is an asymmetry namely that some customers are easier to serve than others it turns out that profits are negatively related to difficulty of service and that profits and market share are negatively related the results of this model are used to shed light on some aspects of the collusion versus differential efficiency debate and are also compared with vertical product differentiation models copyright 1990 by blackwell publishing ltd

differential efficiency market structure and price a persistent question in industrial economics is the underpinning of the link between market concentration and price how much of the link can be attributed to market power and how much to market efficiency this paper develops a theoretical model to address that question applied to the us portland cement industry the model indicates that both impacts matter in relative terms however the market power effect is twice as large as the efficiency effect an implication for merger policy is that the beneficial efficiency effects of mergers may not be obtained without the detrimental market power effects as well

unions and profitability over the 1980s some evidence on union firm bargaining in the united kingdom in this paper an attempt is made to assess the behaviour of the rate of return on sales of unionised firms as compared to the non unionised ones in the late 1980s in the united kingdom the main aim is to examine what has happened to the relationship between unionisation and profitability after the changes in the union legislation competition environment and cyclical variations that took place over this period the impact of different forms of union firm bargaining on the union profitability effect is also examined the data reveal that the negative union effect on profitability exists even after controlling for firm specific fixed effects but that it has been sharply reduced over the 1980s

state regulation and the structure conduct efficiency and performance of us auto insurers abstract this research investigates the impact of regulation on state automobile insurance markets while controlling for other state insurance market characteristics that may be related to performance data for a large sample of insurers are analyzed the results suggest that insurers in competitive and non stringently regulated states may benefit from market power by charging higher unit prices however insurers in these states are on average more cost x efficient and cost x efficient insurers charge lower prices and earn smaller profits the empirical results also suggest that insurers in some rate regulated states are less revenue and cost scale efficient than in competitive states

oligopolistic pricing over the deterministic market demand cycle some evidence from the us portland cement industry abstract haltiwanger and harrington 1991 haltiwanger j harrington j e jr 1991 the impact of cyclical demand movements on collusive behavior rand journal of economics 22 89 104 formulated a theory of self enforcing collusion assuming a deterministic demand cycle they predicted that under a self enforcing non cooperative pricing scheme for any level of demand the price in the rising part of the cycle would always be greater than the price in the falling part of the cycle they also predicted that the path of collusive profits should reach its peak before market demand we test their predictions using data from the portland cement industry the hypotheses are tested using a multi equation system differentiating the boom and the bust periods from 1974 to 1989 the results support both of haltiwanger and harrington s hypotheses

investment interdependence and the coordination of lumpy investments evidence from the british brick industry the brick industry is characterized by regional markets lumpy capacity increments and high fixed costs in such an industry the coordination of rival expansions in capacity can be crucial to the profitability of those expansions evidence from the british brick industry suggests that excess investments are generally avoided but there is little support for existing theories to explain how this is achieved the explanation for how coordination failures are avoided is based on firm heterogeneity the regional dimension to the investment decision and the prospects for and consequences of growth by acquisition

efficiency versus collusion a reformulation of the weiss test the weiss test has been used to discriminate between the efficiency and collusion hypotheses using a conventional oligopoly model we show that the test is valid for the former hypothesis but not the latter contrary to recent emperical studies we find that a negative coefficient on concentration in profitability equations does not refute the collusion hypothesis in fact this finding supports the hypothesis if the sample is dominated by small firms

endogenous number of firms horizontal concentration and heterogeneity of firms a note we re examine implications of heterogeneity of firms under a cournot setting on free entry equilibria concerning the number of firms heterogeneity reduces the number of firms in equilibrium the larger the cost asymmetries the smaller the free entry equilibrium number of firms in an industry

deadweight loss in oligopoly a new approach ever since harberger s 18 pioneering article researchers have attempted to estimate the welfare loss resulting from the exercise of market power despite nearly four decades of work in this area however surprisingly few researchers disagree with harberger s finding that deadweight loss is quite small while many dispute his claim that deadweight loss in manufacturing amounts to only about 0 1 of gnp few estimates exceed more than 1 3 of the value of output some of the higher estimates moreover include losses of a broader nature than the purely allocative losses on which harberger focuses in this paper i use a generalization of a recent model of oligopoly to estimate the magnitude of deadweight loss in the u s manufacturing sector while the exact magnitude of the losses depends on several parameters the estimates indicate that deadweight loss may be considerably higher than earlier work suggests ranging from roughly 6 10 of the value of shipments if demand is inelastic to over 20 if demand is elastic

the impact of concentration and elasticity on line of business profitability abstract this paper explores the roles played by concentration and elasticity in a model of line of business profitability it concludes that the roles are conceptually distinguishable that concentration has a seperate effect on profit via the degree of collusion which is not eliminated by its dependence on elasticity and that assertions about a bias due to the exclusion of elasticity are based on incomplete theoretical foundations

competitive advantage and collusive optima cost differences may often be important in real oligopolies if side payments are impossible the standard cartel objective total industry profits lacks plausibility when costs differ this essay considers plausible alternatives four different technologies for effecting collusion which are essentially identical when costs are equal define sets of possible profits axiomatic bargaining models are used to select unconstrained optima from among these possibilities simple functional forms are employed low cost firms with large shares in cournot equilibrium may have little to gain from collusion if collusion is effective low cost firms will have relatively low estimated conjectural variations

interpreting a correlation between market structure and performance certain types of controlled experiments may enable causal inferences to be made about the relationship between two variables other types of experiments can be used to deal with the not completely unrelated notions of consistency in estimation exogeneity of variables and with temporal ordering generally however causal interpretations of a relationship are simply imposed on the data by appeal to an underlying theory in this paper we shall examine the theoretical basis of profits concentration correlations arguing that such correlations cannot be given a causal interpretation of the conventional kind running from structure to performance section iii 1 lest this conclusion seem to undermine the basis for anti trust policy we shall also argue that such erroneous causal interpretations are unnecessary in making a case for intervention based on structure although they do direct attention towards inappropriate targets profits concentration regressions play a role it will be argued mainly in the derivation of intervention rules section iii while the causal interpretation of co efficients is our primary concern here there is also a sense in which correlations can be interpreted as measuring the known but unobserved parameters of a model imposed on the data and we shall close section iv with a few remarks on this second issue

margin regulation and stock market volatility using daily and monthly stock returns we find no convincing evidence that federal reserve margin requirements have served to dampen stock market volatility the contrary conclusion expressed in recent papers by hardouvelis 1988a b is traced to flaws in his test design we do detect the expected negative relation between margin requirements and the amount of margin credit outstanding we also confirm the recent finding by schwert 1988 that changes in margin requirements by the fed have tended to follow rather than lead changes in market volatility after 55 years stock market margin requirements are again a source of controversy the securities and exchange act of 1934 transferred to the federal reserve system the authority exercised previously by the new york stock exchange and other private sector exchanges to set the minimum margins i e down payments that securities brokers and dealers subsequently expanded to all lenders must require of customers purchasing common stocks on credit the transfer of authority reflected the view widely held at the time that the low initial margins set by the exchanges had fueled the stock market boom of the 1920 s and that the frenzied liquidation of shares in response to margin calls had accelerated the crash in october 1929 supposedly dragging the economy down with it congress hoped that timely raising of margin requirements by the monetary authorities might dampen speculative excesses before they raged out of control or in today s terms that margin controls might reduce market volatility what the federal reserve has done since then with its margin setting authority can be seen from figure 1 which shows the time paths both of margins and one measure of market volatility from october 1934 to december 1987 margin requirements were set initially at 45 percent raised to 55 percent during the boomlet of 1936 and then cut back to a low of 40 percent after the sharp stockmarket break in the autumn of 1937 the requirement stayed at that level for the remainder of the 30 s and most of the war years but was stepped up sharply as the war drew to a close reaching 100 percent i e all cash no borrowing for most of 1946 changes were frequent over the next two and a half decades

welfare losses in canadian manufacturing under alternative oligopoly regimes abstract welfare losses are computed for 167 canadian industries using simulations of a general oligopoly model the computations cover a wide range of oligopoly behavior and reveal the implications of different demand marginal cost and conjectural variation elasticities for the case of horizontal cost losses are a maximum of 0 51 percent of gnp under cournot equilibrium and 6 35 percent under a collusion equilibrium in general losses increase as the absolute value of the price elasticity of demand declines and as marginal cost and conjectural variation elasticities increase

on the specification of structure performance relationships a comment abstract sawyer 1982 has argued that conventional specifications of structure performance relationships are based on conflicting theoretical approaches and that simultaneous equation estimation of such relationships is not appropriate this paper however defends the conventional wisdom by employing a simple integration of the alternative approaches and argues that simultaneous equation estimation techniques may well have a useful role to play

domestic market power and foreign trade abstract this paper develops a conjectural variation model to include foreign trade and applies it to the swedish industry the main conclusions emerging from the empirical application are that the degree of implicit collusion is generally very low in sweden and further that while high seller concentration exerts a positive influence on this degree there is strong and counteracting competitive pressure from foreign trade a more general conclusion is that it is important to include foreign trade in analyses of market power in open economies

industrial concentration and price cost margin of the indonesian food and beverages sector this article investigates trends in industrial concentration and its relationship with the price cost margin in 54 subsectors of the indonesian food and beverages sector in the period 1995 to 2006 this study uses firm level survey data provided by the indonesian bureau of central statistics bps classified at the five digit international standard industrial classification isic level the results show a significant increase in industrial concentration in 1995 to 1999 which coincided with the period of the economic crisis in indonesia after 1999 the industrial concentration exhibits a slightly decreasing long term trend furthermore the industrial concentration for all subsectors tends to converge to the same value in the long run additionally results show that higher industrial concentration yields a higher price cost margin finally the introduction of the competition law in 1999 has slightly lowered industrial concentration and the price cost margin

stock volatility in the new millennium how wacky is nasdaq abstract the recent volatility of stock prices has caused many people to conclude that investors have become irrational in valuing at least some stocks this paper investigates the behavior of the volatility of stocks on the nasdaq which tend to be smaller companies with more growth options in relation to the more seasoned issues reflected in the standard poor s 500 portfolio it also analyzes the relation of the unusual nasdaq volatility to the hot ipo market in 1998 and 1999 the factor that seems to explain unusual volatility best is technology not firm size or the immaturity of the firm

a comparative analysis of intertemporal behavior of profits japan and the united states this paper first asks whether the working of market forces in japanese manufacturing industries is unique to them or similar to u s counterparts it is found that autoregressive profit equations for 376 japanese firms over 1964 82 are on average similar to those for 413 u s firms over 1964 80 the paper next asks whether the interindustry pattern of profit adjustments in japan is related to industry traits in a manner analogous to the united states in this case specific national differences between the two countries in the effects of imports industry growth and capital intensity on the profit adjustment process are found copyright 1989 by blackwell publishing ltd

profit margins and the business cycle evidence from uk manufacturing firms this paper presents some empirical models of profitability using panel data covering 709 large u k companies ove r the 1970s and 1980s focusing specifically on the role of aggregate demand shocks in shaping firm level profitability in basic regressi ons and in quite complex econometric models the results suggest that firm level profit margins fell heavily during the deep manufacturing recession of the early 1980s and as such are consistent with model s predicting the procyclical nature of profit margins this result hol ds across different product groups producer goods consumer durables a nd nondurables though the timing of the impact of aggregate shocks appears to differ copyright 1993 by blackwell publishing ltd

price behaviour in the italian manufacturing industry abstract this paper sets out to test the hypothesis that the price cost margins of italian manufacturing industries are influenced by excess domestic demand and by international prices of manufactured products using annual data 1956 1982 a mark up equation is estimated for each of the twelve industries in which the manufacturing sector has been disaggregated the ratio of industry price to average total cost is functionally related to the ratio of international price to domestic cost and a measure of excess demand on the basis of the estimates which are obtained by maximum likelihood techniques and some specification tests it is concluded that both factors influence pricing behaviour although their effect is not uniformly significant in every sector

looking at the cost side of monopoly welfare loss under oligopoly is defined as that part of consumer surplus which is lost and not regained by higher profits in a model with asymmetric firms this implies that the total welfare loss consists of the deadweight loss triangle plus a cost side inefficiency effect due to the fact that in imperfect markets not all firms utilize the lowest cost technique using a flexible cv model we calculate these effects empirically for two relatively homogeneous industries pulp paper and cement the deadweight loss triangles are shown to be smaller than the cost difference effect the staircase for these industries

a model of pricing behavior an econometric case study empirical pricing studies are scarce in the modern literature in spite of their obvious importance for understanding competition the present study employs a structural model to identify deviations of individual pricing routines from the commonly assumed single period profit maximization it is applied to individual wholesale firms because wholesale pricing has a decisive influence on the price formation in the entire economic system and because hardly any research exists in this area the results show that wholesale firms operate in imperfectly competitive world markets providing a highly differentiated service package traders apply pricing rules consistent with cost mark up pricing the mark up varies among traders with the extent to which a firm s pricing strategy deviates from full profit maximization this divergent behavior is associated with firm size the type of buyers served and other aspects of the wholesale service package

are economic rents good for development evidence from the manufacturing sector abstract are rents or excess profits good for development rents could induce firms to lobby or bribe governments to preserve the status quo on the other hand rents may promote growth by giving firms the needed funds to make investments in fixed capital or research and development to test this question empirically we use a panel of manufacturing data at the industry country year level and measure rents by the mark up ratio we find that the relationship between rents and growth is strongly negative with the results being primarily driven by the poorer countries or those with worse institutions in the sample this result holds when we instrument for mark up using the average mark up in other industries in the country even in industries with high external financing needs and countries with less developed financial sectors precisely the places where excess profits could be used to drive growth we find that rents are especially harmful consistent with the rent seeking mechanism we highlight we find that high rents are associated with a slower reduction in tariffs we also test for the most likely alternative mechanism that higher rents cause slower growth through the channel of allowing managerial slack we find that controlling for management has little impact on our estimate of the impact of mark up on productivity growth

competition effects of price liberalization in insurance insurance services have a prominent role in modern societies empirical evaluation of market interactions in insurance is however scarce to fill this gap two models are proposed each captures the main features of either regulated or deregulated markets three levels of decisions reinsurance sales effort and prices generate testable predictions on firm behavior with respect to sales effort choices recent evolution of the portuguese market provides a natural data set for application estimation before and after price deregulation reveals a noticeable change in behavior coordination has characterized the interaction under price regulation competition between firms has increased after deregulation copyright 1996 by blackwell publishing ltd

small firms in economic theory this is the fourth of a series of critical survey articles the aim of the series is to report on recent developments to provide an assessment of alternative approaches and to suggest lines of future inquiry it is intended that the articles will be accessible not only to other academic researchers but also to students and others more practically involved in the economy future survey articles will include warren samuels on institutional economics and philip arestis on post keynesian

foreign trade elasticities and import discipline this paper provides new evidence on the trade as discipline7rsquo hypothesis by considering the determination of price cost margins with a panel of 41 four digit us food manufacturing industries from 1972 to 1987 following the empirical specification suggested by competitive fringe oligopoly models we include estimated domestic demand elasticities and cross price elasticities of import demand as explanatory variables and the empirical results confirm the importance of these variables in assessing the hypothesis

price cost margins and imports in an oligopolistic market abstract in a recent letter in this journal urata 1979 found an unexpected positive and significant association between price cost margins and import to domestic shipment ratio for the u s textile and apparel industries in the present letter a theoretical explanation for this phenomenon is presented by extending a conjectural variation oligopoly model

oligopoly distribution and the rate of profit this paper sets out to explore the division of national income between workers and capitalists in a world where monopoly capitalism dominates both for its intrinsic interest and because of its relevance to the process of accumulation elsewhere cowling 1978 i have tried to substantiate the argument for regarding the contemporary capitalist world as essentially monopolistic rather than essentially competitive but 1 will return to that theme at v uious points in the paper the basic point is that the major corporations art now organ d in often interlinked oligopoly groups in many cases wi h an international base and have captured dominant positions which are relatively unassailable they will remain unassailable partly because these dominant oligopolies will logically invest in their maintenance in order to secure the benefits of the stream of monopoly rents associated with their position competition between and within national oligopoly groups will occasionally break out but these should be seen as transient elements in the accommodation of dilferent capitals to each other the norm in such an oiigopolistic world will be collusion over output or plricing policies with collusion being itself the product of potentially rivalruus behaviour a seemingly paradoxical result which we will seek to subslantiate agents have substantial economic power and will use it in a variety of ways which has to be recognired in any discussion of the distribution of national income this point was obviously clearly recognised by kalecki 1971 steindl 1952 and baran and sweezy 1966 and the present paper follows closely on their work the starting point will be an attempt to complete kalecki s model of distribution by specifying the relationship between elements of market structure and the share of gross capitalist income plus salaries in value added this will allow us to precisely identify those processes which will lead

domestic concentration foreign trade and economic performance abstract in a competitive fringe model the impact of concentration on price cost margins can be shown to be ambiguous therefore looking at the relationship between rates of return and concentration ratios is not sufficient for perceiving collusive elements in this paper a model is set up that permits discerning collusion more clearly additional evidence concerning collusion can be gained by analyzing the influence of exports and imports on price cost margins applying this approach to west germany yields the result that the collusiveness prevailing in domestic markets has not visibly decreased in spite of a substantial increase in foreign trade

concentration profitability and trade in a simultaneous equation analysis the case of taiwan this paper is the first attempt to use a simultaneous four equation system to study the role of foreign trade in the analysis of market structure and performance and the determinants of trade intensity in a newly industrializing country taiwan a cross sectional analysis is carried out with the manufacturing censuses of 1976 the results indicate that public enterprises significantly influence market structures and performance also import control measures influence import intensity significantly and offset potential impacts of imports on concentration and on profitability however trade intensity is mainly explained by comparative advantage rather than market forces concentration and profitability

the determination of profit margins in uk manufacturing this paper examines the determinants of profit margins in 91 u k manufacturing industries over the period 1983 86 it considers how the inclusion of labor market characteristics in empirical industrial organization specifications affects the estimated concentration margins relationship the empirical work pays detailed attention to the endogenous nature of variables derived from structural industrial organization models the authors report instrumental variables estimates of margins equations in which there emerges a significant role for labor market characteristics indeed both unionization and industrywide unemployment are found to depress profit margins the impact of concentration is seen to be biased downward when these variables are omitted

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

merger policy and competition an analysis of the monopolies and mergers commission s decisions the way in which the monopolies and mergers commission views effective competition when reaching decisions involving referred merger bids is examined the objective is to identify issues which the commission has highlighted as important and hence is concerned with subjective rather than objective characteristics it is argued that an expected decrease in competition was a critical reason for having a bid disallowed whereas bids which were expected to either increase competition or leave it unaffected were likely to be allowed the analysis then examines the cause of these differing competition conclusions in particular those relating to avoiding the commission concluding that competition was likely to decrease probit analysis was used to estimate the relationships and it was found that for the increase decrease competition sample the important variables were market share and price in the decrease no change in competition sample the significant variables were efficiency the balance of payments pr

the degree of monopoly international trade and transnational corporations abstract using a simple model of production the paper focuses upon the impact of intra firm imports on the theoretical specification of the degree of monopoly and thereby on the functional distribution of income in particular it is shown that a rise in an industry s import penetration need not imply a fall in the degree of monopoly data for the united kingdom new motor car industry is used to assess the bias that results from ignoring intra firm imports when estimating the degree of monopoly it is also pointed out that an identical framework can be employed to analyse intra firm exports

the measurement of profitability and the diagnosis of market power this paper develops a model which yields the specification of an empirical test for the difference between price and marginal revenue which will be significantly positive if a firm exercises market power the test can be carried out with any of a number of commonly used measures of accounting profitability and embodies a specific functional form for the consideration of nonconstant returns to scale the model is estimated for four firms in the medical surgical supply industry and four firms in the motor vehicle industry the results are consistent with the hypothesis that product differentiation is an important basis for firm specific market power import quotas are shown to increase market power in the motor vehicle industry claims that accounting data cannot be used to analyze market power are rejected

testable competing hypotheses from structure performance theory efficient structure versus market power this paper provides a structure performance theory that can accommodate leading firm efficiency as well as several competing market power hypotheses the author derive s testable implications distinguishing the simple collusion product differentiation and scale economy hypotheses from the innovative lea ding firm alternative it is shown that recent evidence of a positive market share price cost margin pcm relationship and a nonpositive concentration pcm relationship can reject the scale economy and simpl e collusion hypotheses in homogeneous product markets unfortunately this same evidence cannot reject the product differentiation hypothe sis in favor of leading firm efficiency copyright 1988 by blackwell publishing ltd

market structure and price cost margins in a paper that has become a standard reference in the structure conductperformance approach to industrial economics cowling and waterson 1976 developed a theoretical rationale for expecting industry profitability to be positively correlated with the level of concentration their model based on a simple algebraic description of oligopoly behaviour has been interpreted as providing a justification for the common empirical practice of cross industry regression analysis of price cost margins in terms of concentration levels in the present paper we show that on further examination this model implies a joint determination of margins and concentration this provides some interesting comparative static results of relevance to inter industry differences in concentration levels equally however it leads to various cautionary insights concerning the meaning of price cost margin versus concentration regressions

the discipline of imports the case of sweden in examining the constraints that imports competition imposes on the price cost margins in swedish manufacturing industries the paper addresses two questions whether the free trade agreement between the ec and efta has reinforced the disciplinary effect of imports and whether there are differences between imports of different origins my findings support intensified competition from the free trade agreement even though the disciplinary effect of imports originating from ldcs japan and the asian nics is larger than the effect of imports from other developed countries

demand shifts and market structure in free entry oligopoly equilibria abstract this papers examines the structural implications of demand shifts in free entry oligopoly equilibria the model generalizes the conjectural variations framework to consider asymmetric firm conjectures allows for the possibility of cost differences across firms and endogenizes conditions of entry and exit in the industry in non competitive environments changes in incumbent output and industry profitability are inversely related to changes in the equilibrium price following a demand shift in response to rotations of demand through the equilibrium point changes in profitability are positively related to changes in industry concentration and when marginal costs are non decreasing inversely related to changes in market power

room to move international financial markets and national welfare states a central research question in international political economy concerns the influence of financial markets on government policy outcomes to what extent does international capital mobility limit government policy choices i evaluate the relationship between international financial markets and government policy outcomes with a focus on the government bond market in developed democracies evidence includes interviews with financial market participants and a cross sectional time series analysis of the determinants of interest rates this evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures financial market participants are concerned with a few macroeconomic policy indicators including inflation rates and government deficit gdp ratios but not with micropolicy indicators such as the distribution of government spending across functional categories in these areas governments retain policymaking autonomy i conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research

margin requirements volatility and the transitory component of stock prices official margin requirements in the u s stock market were established in october 1934 to limit the amount of credit available for the purpose of buying stocks since then higher or rising margin requirements are associated with lower stock price volatility lower excess volatility and smaller deviations of stock prices from their fundamental values the results hold throughout the post 1934 period and are not very sensitive to the exclusion of the turbulent depression years from the sample thus margin requirements seem to be an effective policy tool in curbing destabilizing speculation jel 313 520 federal regulation of securities margins was mandated by congress in the securities exchange act of 1934 the stock market experience of the late 1920s led congress to the conclusion that credit financed speculation in the stock market might create excessive market volatility through a pyramidingdepyramiding process congress reasoned that the imposition of margin requirements could constrain the amount of borrowing and prevent excessive market volatility and subsequently gave the federal reserve jurisdiction over the level of margin requirements since 1934 the federal reserve

the efficiency of firms what difference does competition make in cournot oligopoly the efficiency of a firm relative to others determines its market share this relationship gives an incentive to improve efficiency the incentives are greater in markets where firm behaviour is more competitive components of firm efficiency are identified by frontier production function techniques in 19 uk manufacturing sectors technical change average efficiency of each firm relative to the frontier and the efficiency of each firm relative to its own best practice in each period short run declines in market shares and profits induce the firm to improve efficiency relative to its best practice long run differences in efficiency are correlated with differences in gross investment

can small firms find and defend strategic niches a test of the porter hypothesis a number of studies have found a positive relation between market share and profitability michael porter argues that this need not hold when small firms find strategic niches protected by mobility barriers this paper examines that hypothesis by comparing the profitability of large and small lines of business when the activities of the two groups proxied by the allocation of sales across submarkets differ on average the authors find that in heterogeneous product mix industries profits of large lines of business are no longer significantly greater than profits of smaller rivals except that market leaders maintain their advantage regardless of product mix copyright 1989 by mit press

technical efficiency market share and profitability of manufacturing firms in cote d ivoire the technology trap this paper investigates the sources of inefficiency of firms in cote d ivoire and exam ines to what extent these effects translate into poor performance a large majority of firms is technically inefficient producing far below the maximum attainable output level major cost savings can also be realised through enlarging the scale of activities of firms efficiency gains and scale advantages translate into a better competitive position and via their impact on market share into higher profitability however severe growth barriers and imperfect markets keep firms from realising these gains and prevent firms from catching up in technology with respect to their larger older and often foreign owned competitors

labour s share market structure and trade unionism abstract using british manufacturing data this paper tests kalecki s degree of monopoly theory of the determination of factor incomes the paper demonstrates how both product market structure captured by the live firm concentration ratio and trade unionism measured by collective bargaining agreements shape production worker wage share we report estimates in which it emerges that there is an important role for seller concentration in influencing wage share but the estimated trade union coverage results are less robust our tests reveal that once idiosyncratic industry effects and accounted for the union effect on wage share disappears

profit margins and business cycles in the brazilian industry a panel data study the paper investigates the relationship between profit margins and business cycle in the brazilian industry during the 1992 1998 period taking as reference a dynamic panel data model founded around a conjectural variation framework the empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector specific business cycle variables among the most robust results one can highlight the roles of lagged profitability and import intensity and the negligible role of union density schmalensee in 1985 american economic review 75 pp 341 51 outlined three theoretical interpretations associated with the empirical model classical revisionist and managerial econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations

on profitability and industrial concentration in pakistan abstract non inclusion of an important element of market structure in the profitability equation by earlier writers might have caused their estimates to suffer from specification error due to an omitted variable we have tried to formulate a more comprehensive model in which elasticity of demand advertising and concentration capture market structure while the supply side has been incorporated by including productivity other factors used to explain the degree of monopoly are capital intensity advertising and trade our results indicate that the main determinants of the profit margin are capital intensity rising productivity and industrial concentration we find that there was some dilution due to competition from foreign trade but its impact has been swayed by other factors

on the nature and significance of collusive price leadership abstract with the help of a simple analytical model we are able to analyze and to further clarify the conditions for collusive price leadership as they were originally devised by jesse markham within the confines of this model we show how collusion increases price cost margins but at the same time decreases concentration in the industry

profitability concentration imports and exports the case of taiwan s midstream petrochemical industries based on an open economy oligopoly model causalities among domestic firms price cost margin pcm domestic concentration import and export shares are derived and a simultaneous equation system is established by utilizing the 1989 1997 data of taiwan s midstream petrochemical industries three stage least squares is used to estimate the system the empirical results confirm the derived results and demonstrate 1 there exist simultaneous relationships among domestic pcm domestic concentration import and export shares 2 import concentration affects domestic concentration positively but affects domestic pcm import and export shares negatively 3 diversifying international markets improves domestic firms pcm 4 domestic firms seem to be in a situation of collusion

the influence of increased foreign competition on industrial concentration and profitability abstract this paper uses the chilean manufacturing censuses of 1967 and 1979 to examine the effects of the chilean reforms in the mid 1970s on market structure and performance the reforms substantially increased the concentration in industry and substantially reduced profitability these outcomes are interpreted in the light of hypotheses about the effect of potential entrants on market structure and on the pricing behavior of incumbents next a cross sectoral simultaneous equations model of structure and performance is estimated to isolate the contribution of import and export shares to cross sectoral variations in concentration and profitability and to test for structural change between the two censuses the analysis confirms that the liberalization of trade changed the way import and export shares determined profitability and supports the import discipline hypothesis

cooperation v rivalry price cost margins by line of business fl c bureau of economics working papers are preliminary materials circulated to stimulate discussion and critical comment all data contained in them are in the public domain this includes information obtained by the commission which has become part of public record the analyses and conclusions set forth are those of the authors and do not n essarily ref1 t the views of other members of the bureau of economics other commission staff or the commission itself upon request single copies of the paper will be provided references in publications to fit bureau of economics working papers by ffc economists other than acknowledgement by a writer tnat ne has access to such unpublished materials should be cleared with the author to prot t the tentative character of these papers

the relevance of margin regulations note margin credit was singled out for selective credit control in 1934 by the securities exchange act sea this act directed the federal reserve board to regulate security credit so as to prevent the excessive use of credit in the purchase or carrying of securities the principal objectives of the sea were 1 to protect investors from speculative losses 2 to prevent the speculative securities markets from absorbing credit away from productive commercial and agricultural uses and 3 to inhibit security price fluctuations due to credit financed security purchases to date there has been little research into the effectiveness of margin regulations in attaining the objectives of the sea 2 one noteworthy exception is a paper by luckett 1982 which analyzes the efficacy of margin requirements in influencing the investor s degree of personal leverage and risk exposure however luckett s analysis leaves unanswered the impacts of changes in margin requirements on firm valuation security returns uncertainty and the allocation of credit in the economy in this paper modern finance theory is employed to analyze some of these effects we conclude that corporations will take actions so as to offset at least in part the impacts of changes in margin restrictions on personal leverage and that the effects of margin requirements are generally inconsistent with the objectives of the sea reformers

the empirical specification of price cost margins abstract this paper examines why results for profit margin regressions may depend on whether the margin is deflated by industry sales or value added it attributes disparate results to stage of production effects which occur because the price elasticity of demand is an omitted variable

the determinants of exit in an open economy in this paper the determinants of exit are investigated for the manufacturing sector of the united states economy which has been subjected to growing international influences the analysis uses united states cross sectional data the results of the exit equation suggest that low profitability declining industry growth and displacement of incumbents by entrants foster exit international influences are also seen to have an impact on u s manufacturing exit specifically imports into an industry have a small effect on exit and protection has little influence in stemming exit

collusion versus differential efficiency testing alternative hypotheses the predictions of collusion and efficiency based static equilibrium explanations of interindustry profitability differences are formally developed and tested using appropriate econometric techniques with intraindustry data on seventy u s internal revenue service minor manufacturing industries in 1963 and 1972 none of the explanations has much explanatory power the 1963 data are consistent with collusion based models while the 1972 data are inconsistent with all non null hypotheses considered patterns of profitability are sharply different in the two years in complex ways apparently unrelated to cyclical forces or the phase ii price controls implications of these results are discussed copyright 1987 by blackwell publishing ltd

codetermination as a strategic advantage abstract a theoretical model of codetermination is considered where consistent with german institutions firm owners bargain with employees representatives about employment but not about wages a duopoly and a more general oligopolistic situation are analyzed for some range of bargaining power a prisoner s dilemma exists codetermination leads to increased profits if the other firm is a traditional profit maximizer bargaining is the dominant strategy although joint profits would be maximized with unrestricted profit maximization the theory is tested with data from 22 german firms who operate in the same markets over 23 years codetermined firms actually show a different behavior than other companies

the political economy of monopoly and competition a critique of monopoly and stagnation theory abstract this paper examines critically the kaleckian theory of monopoly capitalism proposed by cowling 1982 the supply side of the model is shown to be incapable of providing an aggregate degree of monopoly and the neglect of inter sectoral competition is highlighted on the demand side there is little indication of the source of stagnationary tendencies it is the emphasis on collusion over conflict which underpins stagnation the model is characterised by its emphasis on distribution and exchange at the expense of production relations and is an inadequate representation of monopoly capitalism

price adjustment and market structure abstract this paper shows how the extent of price inertia depends on the form of market competition we first establish that the speed of price adjustment depends on the curvature of the profit function in the region around the optimum price we then show how this depends on market structure we prove the following results 1 1 the speed of price adjustment depends positively on the price elasticity of demand 2 2 the speed of price adjustment depends positively on the number of firms in a market and 3 3 the speed of price adjustment depends negatively on the degree of collusion between firms

animal spirits margin requirements and stock price volatility a simple overlapping generations model is used to characterize the effects of initial margin requirements on the volatility of risky asset prices investors are assumed to exhibit heterogeneous preferences for risk bearing the distribution of which evolves stochastically across generations this framework is used to show that imposing a binding initial margin requirement may either increase or decrease stock price volatility depending upon the microeconomic structure behind fluctuations in economy wide average risk bearing propensity the ambiguous effect on volatility similarly arises when the source of heterogeneity is noise trader beliefs beyond their prudential functions the effects of initial margin requirements on securities markets are not well understood many have argued based upon empirical findings that the level of margin requirements has no discernable impact on stock price behavior nevertheless the view that high margin requirements dampen speculative excesses and reduce excess price volatility remains popular the simultaneous existence of such views highlights the uncertainty surrounding this issue in fact there exists no rigorously articulated theory of the interaction between initial margin requirements and stock prices and their returns characteristics in this paper we construct a simple dynamic model useful for characterizing the effects of initial margin requirements on security prices and returns to analyze the impact of margins we introduce investor heterogeneity into an otherwise simplified overlapping generations olg economy 2 the olg models are constructed so that each generation displays heterogeneous preferences or beliefs the distribution of which evolves stochastically across generations in each of two heterogeneous taste models we consider there are two types of agents one of which is more risk tolerant than the other in one model the

strategic foreign exchange management this paper argues that it is possible to advise firms on how to hedge against foreign exchange risks only if one has detailed knowledge of the competitive environment they work in to illustrate this we compare firms hedging requirements in a number of different standard industrial organizations models in particular the cournot model a model with conjectural variations price taking firms and monopolistic competition consider the situation of a firm producing in germany and selling an important part of its total output in the us obviously its profitability may be seriously compromised by an unexpected appreciation of the dm relatively to the the company can react to this uncertainty in two ways either it can assume that the conditions of the modigliani miller theorem are approximately fulfilled and that it best serves the interests of its shareholders by behaving in a risk neutral fashion alternatively the firm may for a variety of reasons behave as a risk averter itself and try to obtain some coverage against exchange rate risk when looking at the amount of insurance taken up by companies on conventional insurance markets one gets the impression that the latter alternative risk averse firms is for many practical cases a realistic assumption the activities of many companies are more easily understood if one admits that they exhibit a certain degree of risk aversion if one accepts this one may go on to ask just how companies should go about insuring themselves against unexpected exchange rate fluctuations more specifically one has to study how much exchange risk the firms should insure against and which exchange rates are of relevance in the example above of a german company selling in the us the answer might at first sight seem obvious the company should obtain coverage against dm fluctuations for an amount approximately equal to its anticipated revenues on brief reflection it immediately appears that this is surely an excessively simplistic answer first the amount of coverage required must be affected by the question of how the price of the product varies when the dm exchange rate shifts second it may be the case that the german company s main competitors are located in say france in this case fluctuations of the

competition in the us meatpacking industry is it history the us meatpacking industry has become concentrated to a degree not experienced since the days of the beef trust a century ago a number of mainstream studies have investigated if such concentration has been detrimental to competition just as earlier studies may have helped shape competition policy towards meatpacking a century ago contemporary studies have made their way into current discussions and may shape competition policy at the turn of this century this paper asks whether or not contemporary studies are useful in informing competition policy after comparing how competition looks from the econometric vantage point with how it looks from the vantage point of the industry s 300 yr history this article concludes that mainstream studies are more useful for a competition policy targeting conduct rather than structure

the structure performance relationship at the firm level abstract this letter provides an explanation for recent empirical results that suggest that market concentration has a negative effect on profitability at the firm level it also casts doubts on traditional interpretations of high market shares as evidence of market power

endogeneity in the concentration price relationship causes consequences and curses the ordinary least squares estimator of the effect of concentration on price is biased for two reasons first performance feeds back into structure causing a simultaneous equations bias second as a function of outputs or revenues measured concentration is correlated with determinants of price that are at best measured with error so measured concentration is correlated with the error term with panel data fixed effects procedures can be combined with instrumental variables to eliminate bias from both sources in concentration price regressions for the airline industry the bias can be substantial and negative copyright 1993 by blackwell publishing ltd