An empirical test of spatial competition in the audit market
AbstractThis study empirically examines the effects of competition through differentiation on audit pricing. Based on prior economic theory on differentiated-product markets (e.g., Hotelling, 1929; Tirole, 1988), we hypothesize that audit fees are affected by an auditor's relative location in a market segment. We define audit markets per industry segment and U.S. Metropolitan Statistical Area and specify an auditor's industry location relative to the client (auditor–client industry alignment) and relative to the closest competitor (industry market share distance to closest competitor). We find that audit fees increase in both auditor–client industry alignment and industry market share distance to the closest competitor.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Accounting and Economics.
Volume (Year): 53 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jae
Audit markets; Price competition; Industry specialization; Differentiation;
Find related papers by JEL classification:
- M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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