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Competition Policy And The Impact Of Market Structure On Companies’ Profitability

Author

Listed:
  • Boban Stojanović

    (University of Niš, Faculty of Economics)

  • Milan Kostić

    (University of Kragujevac, Faculty of Economics)

Abstract

Competition policy has a role to ensure equal conditions for all market participants. This policy enables the realization of effective competition, which is a prerequisite for economic and broader social progress. To make competition policy be of a good quality it must be based on the findings of economic science, in particular the one concerning industrial organizations and relationships among market structure, conduct and performance of companies (SCP). The analysis of these relationships is the way for identifying market imperfections and the consequences that these imperfections have on society as a whole. The paper promotes economic analysis in the field of competition through empirical evaluation of industrial organization findings. Empirical research has shown a statistically significant positive impact of the change in market share on the change of the profit margin of companies operating in the Serbian beer market. Given that this market is highly concentrated, any increase in market share increases profit margin, and vice versa. Empirical research conducted in the paper is a sound basis for the professional and economics-founded application of modern competition policy measures aimed at preventing and punishing anti-competitive behaviour.

Suggested Citation

  • Boban Stojanović & Milan Kostić, 2013. "Competition Policy And The Impact Of Market Structure On Companies’ Profitability," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 5-6, pages 325-338, August.
  • Handle: RePEc:srb:journl:y:2013:i:5-6:p:325-338
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    File URL: http://www.ses.org.rs/ekonomika-preduzeca/2013-5-6-03.pdf
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    References listed on IDEAS

    as
    1. Mark Blaug, 2001. "Is Competition Such a Good Thing? Static Efficiency versus Dynamic Efficiency," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(1), pages 37-48, August.
    2. Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
    3. Min, Sungwook & Wolfinbarger, Mary, 2005. "Market share, profit margin, and marketing efficiency of early movers, bricks and clicks, and specialists in e-commerce," Journal of Business Research, Elsevier, vol. 58(8), pages 1030-1039, August.
    4. Caves, Richard E., 2007. "In praise of the Old I.O," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 1-12, February.
    5. Grabowski, Henry G & Mueller, Dennis C, 1970. "Industrial Organization: The Role and Contribution of Econometrics," American Economic Review, American Economic Association, vol. 60(2), pages 100-104, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    competition policy; market structure; market share; non-competitive behaviour; profit rate;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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