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Collusion versus Differential Efficiency: Testing Alternative Hypotheses

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  • Schmalensee, Richard

Abstract

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.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 35 (1987)
Issue (Month): 4 (June)
Pages: 399-425

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Handle: RePEc:bla:jindec:v:35:y:1987:i:4:p:399-425

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Fernando Vega Redondo, 1991. "Technological Change And Market Structure: An Evolutionary Approach," Working Papers. Serie AD 1991-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Mercedes Gumbau Albert & Joaquín Maudos Villarroya, 2000. "- Profitability, Market Structure And Efficiency: An Application To The Spanish Industry," Working Papers. Serie EC 2000-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. John A. List, 2009. "The Economics of Open Air Markets," NBER Working Papers 15420, National Bureau of Economic Research, Inc.
  4. Ferrier, Gary D. & Klinedinst, Mark & Linvill, Carl B., 1998. "Static and Dynamic Productivity among Yugoslav Enterprises: Components and Correlates," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 805-821, December.
  5. Ourania Notta & Kostas Oustapassidis, 2001. "Profitability and Media Advertising in Greek Food Manufacturing Industries," Review of Industrial Organization, Springer, vol. 18(1), pages 115-126, February.
  6. Amato, Louis H. & Wilder, Ronald P., 2004. "Global competition and global markets: some empirical results," International Business Review, Elsevier, vol. 13(3), pages 401-416, June.
  7. Joseph Shaanan, 2006. "Ricardian or Monopoly Rents? The Perspective of Potential Entrants," Eastern Economic Journal, Eastern Economic Association, vol. 32(1), pages 19-30, Winter.
  8. Mita Bhattacharya, 2002. "Group Profit, Market Share and Efficiency: Evidence from Australian Manufacturing," Review of Industrial Organization, Springer, vol. 20(2), pages 187-199, March.

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