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Differential efficiency, market structure and price

Author

Listed:
  • Azzeddine Azzam
  • David Rosenbaum

Abstract

A persistent question in industrial economics is the underpinning of the link between market concentration and price. How much of the link can be attributed to market power and how much to market efficiency? This paper develops a theoretical model to address that question. Applied to the US portland cement industry, the model indicates that both impacts matter. In relative terms, however, the market power effect is twice as large as the efficiency effect. An implication for merger policy is that the beneficial efficiency effects of mergers may not be obtained without the detrimental market power effects as well.

Suggested Citation

  • Azzeddine Azzam & David Rosenbaum, 2001. "Differential efficiency, market structure and price," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1351-1357.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1351-1357
    DOI: 10.1080/00036840010006615
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    Cited by:

    1. Evens Salies, 2008. "Mergers in the GB electricity market: effects on retail charges," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1483-1490.
    2. repec:spo:wpecon:info:hdl:2441/7068 is not listed on IDEAS
    3. Yang, Sheng-Ping, 2005. "Market power and cost efficiency: the case of the US aluminum industry," Resources Policy, Elsevier, vol. 30(2), pages 101-106, June.
    4. Monroe, Kevin H., 2012. "Decomposition of Information and Communication Technology for Development: A Case for Investment in and Trade of Intellectual Property," Master's Theses 156572, University of Minnesota, Department of Applied Economics.

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