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Advertising, Concentration, and Profitability: The Simultaneity Problem

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  • Stephen Martin

Abstract

This article examines the identification of a system of equations which seeks to explain industrial profitability, concentration, and advertising intensity. We specify a concentration equation which reflects a dynamic adjustment to a long-run level which depends on the nature of entry conditions. The specification of the concentration equation is seen to be critical to the identification of the profitability equation. We test the model against a sample of input-output table detailed industries and find that the resulting estimates suggest the importance of avoiding the omission of relevant explanatory variables.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 10 (1979)
Issue (Month): 2 (Autumn)
Pages: 639-647

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Handle: RePEc:rje:bellje:v:10:y:1979:i:autumn:p:639-647

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Cited by:
  1. Matthias Greuner & David Kamerschen & Peter Klein, 2000. "The Competitive Effects of Advertising in the US Automobile Industry, 1970-94," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(3), pages 245-261.
  2. Kim B. Clark, 1982. "Unionization and Firm Performance: The Impact on Profits, Growth and Productivity," NBER Working Papers 0990, National Bureau of Economic Research, Inc.

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