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Structural change and market power in the U.S. food manufacturing sector

  • Kyle W. Stiegert

    (Department of Agricultural and Applied Economics, University of Wisconsin-Madison, Madison, WI 53706)

  • Shinn-Shyr Wang

    (Department of Resource Economics, University of Massachusetts-Amherst, Amherst, MA 01003)

  • Richard T. Rogers

    (Department of Resource Economics, University of Massachusetts-Amherst, Amherst, MA 01003)

This study develops an intertemporally linked market model to explore the relationships between price-cost margins, market concentration, and advertising outlay. The study used data from 48 four-digit SIC (standardized industrial classification) codes for the Food and Tobacco Processing Industries during the 1970s, 1980s, and 1990s. The authors' findings provide evidence that both high and low levels of performance provide signals to industries to consolidate, but for obvious and different reasons. Further, increased consolidation leads to increased entry barriers (advertising) and higher profits to the industry. Our findings are supportive of both Chicago and Traditionalist Schools of thought about antitrust enforcement: Neither emerges in a dominant position. Endogeneity issues and findings within the intertemporal structure cast considerable doubt about overly simplistic structure-performance paradigms of firm behavior. [JEL Code: L11, L40, L66]. © 2009 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.20193
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Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 25 (2009)
Issue (Month): 2 ()
Pages: 164-180

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Handle: RePEc:wly:agribz:v:25:y:2009:i:2:p:164-180
Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Bhargava, A & Franzini, L & Narendranathan, W, 1982. "Serial Correlation and the Fixed Effects Model," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 533-49, October.
  3. Charles DeLorme & Peter Klein & David Kamerschen & Lisa Ford Voeks, 2003. "Structure, conduct and performance: a simultaneous equations approach," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 13-20.
  4. Liebowitz, S J, 1982. "What Do Census Price-Cost Margins Measure?," Journal of Law and Economics, University of Chicago Press, vol. 25(2), pages 231-46, October.
  5. Nagle, Thomas T, 1981. "Do Advertising-Profitability Studies Really Show That Advertising Creates a Barrier to Entry?," Journal of Law and Economics, University of Chicago Press, vol. 24(2), pages 333-49, October.
  6. Kwoka, John E, Jr, 1979. "The Effect of Market Share Distribution on Industry Performance," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 101-09, February.
  7. Mueller, Willard F & Rogers, Richard T, 1980. "The Role of Advertising in Changing Concentration of Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 89-96, February.
  8. Ornstein, Stanley I, 1975. "Empirical Uses of the Price-Cost Margin," Journal of Industrial Economics, Wiley Blackwell, vol. 24(2), pages 105-17, December.
  9. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
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