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Differential efficiency, market structure and price

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  • Azzeddine Azzam
  • David Rosenbaum
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    Abstract

    A persistent question in industrial economics is the underpinning of the link between market concentration and price. How much of the link can be attributed to market power and how much to market efficiency? This paper develops a theoretical model to address that question. Applied to the US portland cement industry, the model indicates that both impacts matter. In relative terms, however, the market power effect is twice as large as the efficiency effect. An implication for merger policy is that the beneficial efficiency effects of mergers may not be obtained without the detrimental market power effects as well.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840010006615
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 33 (2001)
    Issue (Month): 10 ()
    Pages: 1351-1357

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    Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1351-1357

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    Cited by:
    1. Yang, Sheng-Ping, 2005. "Market power and cost efficiency: the case of the US aluminum industry," Resources Policy, Elsevier, vol. 30(2), pages 101-106, June.
    2. Evens Salies, 2006. "Mergers in the GB Electricity Market: Effects on Retail Charges," Sciences Po publications 2006-8, Sciences Po.

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