Price Competition, Non-price Competition and the Market Structure: Theory and Evidence from the UK
This paper examines the impact of price competition on advertising/R&D expenditure and market structure. A general theoretical result is derived, which restricts the space of possible outcomes regarding the behaviour of concentration and advertising/R&D expenditure following an intensification of price competition. The theory is tested using UK data on the evolution of competition, concentration and advertising over 1954-77. The econometric results suggest that the introduction of restrictive practices legislation in the UK caused a rise in concentration in previously cartelized high-advertising manufacturing industries and probably also a fall in advertising intensity. Copyright 2000 by The London School of Economics and Political Science
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Volume (Year): 67 (2000)
Issue (Month): 267 (August)
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