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When Different Market Concentration Indices Agree

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  • Hennessy, David A.
  • Lapan, Harvey E.

Abstract

Market concentration ratios are popular statistics for characterizing the extent of market dominance in an imperfectly competitive market, but these ratios may not agree when comparing two markets. Neither do they necessarily agree with the Herfindahl-Hirschman or entropy indices. This letter compares two Cournot oligopoly markets in which firms have constant unit costs. It is shown that the majorization pre-ordering on normalized marketing margin vectors is both necessary and sufficient for all aforementioned indices to agree on which is the more concentrated market.

Suggested Citation

  • Hennessy, David A. & Lapan, Harvey E., 2006. "When Different Market Concentration Indices Agree," Staff General Research Papers Archive 12550, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:12550
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    References listed on IDEAS

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    1. Zhao, Jingang, 2001. "A characterization for the negative welfare effects of cost reduction in Cournot oligopoly," International Journal of Industrial Organization, Elsevier, pages 455-469.
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    7. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, pages 585-604.
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    Cited by:

    1. Hrazdil, Karel & Zhang, Ray, 2012. "The importance of industry classification in estimating concentration ratios," Economics Letters, Elsevier, vol. 114(2), pages 224-227.
    2. Darko Tipurić & Mirjana Pejić Bach, 2009. "Changes in Industrial Concentration in the Croatian Economy (1995-2006)," EFZG Working Papers Series 0903, Faculty of Economics and Business, University of Zagreb.
    3. ZHANG, Lu & GUO, Qing & ZHANG, Junbiao & HUANG, Yong & XIONG, Tao, 2015. "Did China׳s rare earth export policies work? — Empirical evidence from USA and Japan," Resources Policy, Elsevier, pages 82-90.

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