This paper analyses empirically the relationship between market share and profitability in a sample of 722 large Australian firms. This issue is linked to merger policy in Australia since the Australian Competition and Consumer Commission (ACCC) guidelines state that, in many cases, creating a market share in excess of 40 per cent is a reason for an investigation. Using the most up-to-date Australian firm-level data, it is shown that profitability tends to rise the market share exceeds 30%. This result suggests that the merger policy guidelines are broadly in agreement with empirical evidence. However, the empirical results suggest a U-shaped relationship between market share and profitability, with profitability first declining and the rising. This result challenges traditional theory and suggests that the market share to profitability relationship is complex.
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Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 30 (2000) Issue (Month): 2 (September) Pages: 115-132 Download reference. The following formats are available: HTML,
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