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Market concentration and profitability: the empirical evidence from Serbian manufacturing industry

Author

Listed:
  • Radovan Kastratoviæ

    (Institute for Business Research – MBA, Dubrovaèka 24, 11000 Belgrade, Serbia)

  • Dragan Lonèar

    (Faculty of Economics, University of Belgrade, Kamenicka 6, 11000 Belgrade, Serbia)

  • Siniša Miloševiæ

    (Commission for Protection of Competition of the Republic of Serbia, Savska 25, 11000 Belgrade, Serbia)

Abstract

The impact of market concentration on profitability is a controversial question in industrial organization without a clear answer. The aim of the research is to investigate this prospective impact in the context of Serbian manufacturing industry. The main hypothesis of the research is that the increase in market concentration increases the profitability in the markets, due to the collusion of the dominant companies. We test this hypothesis by defining, estimating and testing the model describing the impact of structural and other control variables on market profitability by using secondary panel data for 122 markets, observed in 2015 and 2017. We obtained the data from 30 037 financial reports of the manufacturing industry companies. The model was estimated by using an error component two stage least squares estimator (EC2SLS). The results indicate a statistically significant positive impact of market concentration on profitability, empirically supporting the traditional market power hypothesis.

Suggested Citation

  • Radovan Kastratoviæ & Dragan Lonèar & Siniša Miloševiæ, 2019. "Market concentration and profitability: the empirical evidence from Serbian manufacturing industry," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(1), pages 213-233.
    • Handle: RePEc:rfe:zbefri:v:37:y:2019:i:1:p:213-233
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    References listed on IDEAS

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    More about this item

    Keywords

    market concentration; profitability; competition; collusion; manufacturing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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