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When different market concentration indices agree

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  • Hennessy, David A.
  • Lapan, Harvey

Abstract

Market concentration ratios are popular statistics for characterizing the extent of market dominance in an imperfectly competitive market, but these ratios may not agree when comparing two markets. Neither do they necessarily agree with the Herfindahl-Hirschman or entropy indices. This letter compares two Cournot oligopoly markets in which firms have constant unit costs. It is shown that the majorization pre-ordering on normalized marketing margin vectors is both necessary and sufficient for all aforementioned indices to agree on which is the more concentrated market.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 95 (2007)
Issue (Month): 2 (May)
Pages: 234-240

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Handle: RePEc:eee:ecolet:v:95:y:2007:i:2:p:234-240

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  1. Zhao, Jingang, 2001. "A characterization for the negative welfare effects of cost reduction in Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 455-469, March.
  2. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521785235, November.
  3. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  4. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  5. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
  6. Harvey E. Lapan & David A. Hennessy, 2002. "Symmetry and order in the portfolio allocation problem," Economic Theory, Springer, vol. 19(4), pages 747-772.
  7. Efe A. Ok, 1997. "A note on the existence of progressive tax structures," Social Choice and Welfare, Springer, vol. 14(4), pages 527-543.
  8. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
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Cited by:
  1. Hrazdil, Karel & Zhang, Ray, 2012. "The importance of industry classification in estimating concentration ratios," Economics Letters, Elsevier, vol. 114(2), pages 224-227.
  2. Darko Tipurić & Mirjana Pejić Bach, 2009. "Changes in Industrial Concentration in the Croatian Economy (1995-2006)," EFZG Working Papers Series 0903, Faculty of Economics and Business, University of Zagreb.

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