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Heterogeneities within Industries and Structure-Performance Models

  • Dennis Mueller
  • Burkhard Raunig

This paper tests whether the results from standard structure-conduct-performance [SCP] models estimated at the industry level are sensitive to the degree of heterogeneity of the firms in the industries. Industries are separated into homogeneous and heterogeneous categories depending on whether the profit rates of firms within an industry converge on a common value or not. In "homogeneous" industries we find that both the long-run projected returns on assets for the industries and Bureau of Census price-cost-margins are well explained by variables usually included in SCP models, as in particular industry concentration. In contrast, few if any of the usual SCP-model variables are statistically significant in the regressions for heterogeneous industries.

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File URL: http://hdl.handle.net/10.1023/A:1007775731338
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Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 15 (1999)
Issue (Month): 4 (December)
Pages: 303-320

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Handle: RePEc:kap:revind:v:15:y:1999:i:4:p:303-320
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-65, December.
  2. Bloch, H., 1992. "Sample-Selection Procedures for Estimating the Relationship Between Concentration and profitability from Cross-Industry Data," Papers 1992-05, Tasmania - Department of Economics.
  3. Saxonhouse, Gary R, 1976. "Estimated Parameters as Dependent Variables," American Economic Review, American Economic Association, vol. 66(1), pages 178-83, March.
  4. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-42, June.
  5. repec:cup:cbooks:9780521383721 is not listed on IDEAS
  6. Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
  7. Newman, Howard H, 1978. "Strategic Groups and the Structure-Performance Relationship," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 417-27, August.
  8. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  9. Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
  10. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  11. Saving, Thomas R, 1970. "Concentration Ratios and the Degree of Monopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(1), pages 139-46, February.
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  13. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
  14. Carter, John R, 1978. "Collusion, Efficiency, and Antitrust," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 435-44, October.
  15. Masson, Robert T & Shaanan, Joseph, 1984. "Social Costs of Oligopoly and the Value of Competition," Economic Journal, Royal Economic Society, vol. 94(375), pages 520-35, September.
  16. Geroski, P A, 1981. "Specification and Testing the Profits-Concentration Relationship: Some Experiments for the UK," Economica, London School of Economics and Political Science, vol. 48(191), pages 279-88, August.
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