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Structural change and market power in the U.S. food manufacturing sector

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Author Info

  • Kyle W. Stiegert

    (Department of Agricultural and Applied Economics, University of Wisconsin-Madison, Madison, WI 53706)

  • Shinn-Shyr Wang

    (Department of Resource Economics, University of Massachusetts-Amherst, Amherst, MA 01003)

  • Richard T. Rogers

    (Department of Resource Economics, University of Massachusetts-Amherst, Amherst, MA 01003)

Abstract

This study develops an intertemporally linked market model to explore the relationships between price-cost margins, market concentration, and advertising outlay. The study used data from 48 four-digit SIC (standardized industrial classification) codes for the Food and Tobacco Processing Industries during the 1970s, 1980s, and 1990s. The authors' findings provide evidence that both high and low levels of performance provide signals to industries to consolidate, but for obvious and different reasons. Further, increased consolidation leads to increased entry barriers (advertising) and higher profits to the industry. Our findings are supportive of both Chicago and Traditionalist Schools of thought about antitrust enforcement: Neither emerges in a dominant position. Endogeneity issues and findings within the intertemporal structure cast considerable doubt about overly simplistic structure-performance paradigms of firm behavior. [JEL Code: L11, L40, L66]. © 2009 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.20193
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 25 (2009)
Issue (Month): 2 ()
Pages: 164-180

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Handle: RePEc:wly:agribz:v:25:y:2009:i:2:p:164-180

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Bhargava, A & Franzini, L & Narendranathan, W, 1982. "Serial Correlation and the Fixed Effects Model," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 533-49, October.
  2. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Mueller, Willard F & Rogers, Richard T, 1980. "The Role of Advertising in Changing Concentration of Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 89-96, February.
  4. Kwoka, John E, Jr, 1979. "The Effect of Market Share Distribution on Industry Performance," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 101-09, February.
  5. Liebowitz, S J, 1982. "What Do Census Price-Cost Margins Measure?," Journal of Law and Economics, University of Chicago Press, vol. 25(2), pages 231-46, October.
  6. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
  7. Charles DeLorme & Peter Klein & David Kamerschen & Lisa Ford Voeks, 2003. "Structure, conduct and performance: a simultaneous equations approach," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 13-20.
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Citations

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Cited by:
  1. Tamini, Lota Dabio, 2012. "Optimal quality choice under uncertainty on market development," Working Papers 148589, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  2. McCafferty, Michael & Bhuyan, Sanjib, 2012. "An analysis of market power in the U.S. brewing industry: A Simultaneous Equation Approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124675, Agricultural and Applied Economics Association.
  3. Boehlje, Michael & Roucan-Kane, Maud & Broring, Stefanie, 2011. "Future Agribusiness Challenges: Strategic Uncertainty, Innovation and Structural Change," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 14(5).

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