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Market Structure Conduct Performance (SCP) Hypothesis Revisited using Stochastic Frontier Efficiency Analysis

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  • Edwards, Seanicaa
  • Allen, Albert J.
  • Shaik, Saleem
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    Abstract

    Use of efficiency measures as a proxy for performance to test the market structure-conduct-performance (SCP) hypothesis is explored. Utilizing Battese and Coelli specification, we estimate stochastic frontier production function and SCP equations with output and efficiency measures as endogenous variables. An empirical application to U.S. trucking carries over the period 1994-2003 with emphasis on the agricultural commodity and refrigerated food products carriers is examined. Results reveal that the variables average haul, average load and market concentration significantly affected the efficiency of firms with 2-8 number of years within each firm.

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    File URL: http://purl.umn.edu/21350
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    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21350.

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    Date of creation: 2006
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    Handle: RePEc:ags:aaea06:21350
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    Keywords: Research Methods/ Statistical Methods;

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    1. Frech, H E, III & Mobley, Lee Rivers, 2000. "Efficiency, Growth, and Concentration: An Empirical Analysis of Hospital Markets," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 369-84, July.
    2. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-99, May.
    3. Lahiri, Kajal & Yao, Wenxiong, 2004. "A dynamic factor model of the coincident indicators for the US transportation sector," MPRA Paper 22360, University Library of Munich, Germany.
    4. Kari, Fatimah & Jaafar, Abdul H. & Allen, Albert J. & Couvillion, Warren C., 2002. "Market Structure, Market Share, And Profits In The Surface Freight Industry," 2002 Annual meeting, July 28-31, Long Beach, CA 19757, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Uma Kambhampati & Ashok Parikh, 2003. "Disciplining firms: the impact of trade reforms on profit margins in Indian industry," Applied Economics, Taylor & Francis Journals, vol. 35(4), pages 461-470.
    6. Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
    7. McDonald, James Ted, 1999. "The Determinants of Firm Profitability in Australian Manufacturing," The Economic Record, The Economic Society of Australia, vol. 75(229), pages 115-26, June.
    8. Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(03), December.
    9. Pedro Cantos & José Pastor & Lorenzo Serrano, 1999. "Productivity, efficiency and technical change in the European railways: A non-parametric approach," Transportation, Springer, vol. 26(4), pages 337-357, November.
    10. Bauer, Paul W., 1990. "Recent developments in the econometric estimation of frontiers," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 39-56.
    11. Allen, Albert J. & Shaik, Saleem & Myles, Albert E. & Muhammad, Safdar, 2005. "The Structure Performance Hypothesis and The Efficient Structure Performance Hypothesis-Revisited: The Case of Agribusiness Commodity and Food Products Truck Carriers in the South," 2005 Annual Meeting, February 5-9, 2005, Little Rock, Arkansas 35519, Southern Agricultural Economics Association.
    12. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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