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INNOVATION AND MARKET STRUCTURE: AN EMPIRICAL EVALUATION OF THE 'BOUNDS APPROACH' IN THE CHEMICAL INDUSTRY -super-

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  • PEDRO L. MARÍN
  • GEORGES SIOTIS

Abstract

This paper applies Sutton's [1998] 'bounds approach' to the chemical industry. The approach predicts that (i) the lower bound of the ratio of the 1-firm concentration index to product concentration is bounded away from zero at high levels of product concentration only in high R&D markets and (ii) the lower bound on market concentration is higher and increasing in product concentration in markets with higher R&D intensities. We test these two hypotheses and find that the data strongly support them. A novel feature of our analysis is the use of plant level data in defining products and the classification of products into markets based on end-use. Copyright 2007 Blackwell Publishing Ltd..

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  • Pedro L. Marín & Georges Siotis, 2007. "INNOVATION AND MARKET STRUCTURE: AN EMPIRICAL EVALUATION OF THE 'BOUNDS APPROACH' IN THE CHEMICAL INDUSTRY -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 93-111, March.
  • Handle: RePEc:bla:jindec:v:55:y:2007:i:1:p:93-111
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    1. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc.
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