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Heterogeneities within industries and structure-performance models

Abstract

This paper tests whether the results from standard structure-conduct-performance [SCP] models estimated at the industry level are sensitive to the degree of heterogeneity of the firms in the industries. Industries are separated into homogeneous and heterogeneous categories depending on whether the profit rates of firms within an industry converge on a common value or not. In "homogeneous" industries we find that both the long-run projected returns on assets for the industries and Bureau of Census price-cost-margins are well explained by variables usually included in SCP models, as in particular industry concentration. In contrast, few if any of the usual SCP-model variables are statistically significant in the regressions for heterogeneous industries.

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File URL: https://www.oenb.at/dam/jcr:194946a6-b06f-4a06-8df7-13a045ddd621/wp36_tcm16-6108.pdf
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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 36.

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Length: 25
Date of creation: 21 Dec 1998
Date of revision:
Handle: RePEc:onb:oenbwp:36
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Keywords: structure-conduct-performance models; heterogeneous industries;

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  1. Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
  2. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-42, June.
  3. Masson, Robert T & Shaanan, Joseph, 1984. "Social Costs of Oligopoly and the Value of Competition," Economic Journal, Royal Economic Society, vol. 94(375), pages 520-35, September.
  4. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-65, December.
  5. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  6. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592, November.
  7. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Mueller,Dennis C. (ed.), 1990. "The Dynamics of Company Profits," Cambridge Books, Cambridge University Press, number 9780521383721, November.
  9. Carter, John R, 1978. "Collusion, Efficiency, and Antitrust," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 435-44, October.
  10. Saving, Thomas R, 1970. "Concentration Ratios and the Degree of Monopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(1), pages 139-46, February.
  11. Bloch, H., 1992. "Sample-Selection Procedures for Estimating the Relationship Between Concentration and profitability from Cross-Industry Data," Papers 1992-05, Tasmania - Department of Economics.
  12. Saxonhouse, Gary R, 1976. "Estimated Parameters as Dependent Variables," American Economic Review, American Economic Association, vol. 66(1), pages 178-83, March.
  13. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  14. Newman, Howard H, 1978. "Strategic Groups and the Structure-Performance Relationship," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 417-27, August.
  15. Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
  16. Geroski, P A, 1981. "Specification and Testing the Profits-Concentration Relationship: Some Experiments for the UK," Economica, London School of Economics and Political Science, vol. 48(191), pages 279-88, August.
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Cited by:

  1. Emili Grifell-Tatjé & P. Marquès-Gou, 2002. "Measuring Sustained Superior Performance at the Firm Level," Working Papers 0208, Departament Empresa, Universitat Autònoma de Barcelona, revised Jul 2002.
  2. Simon Feeny & Mark N. Harris & Joanne Loundes, 2000. "A Dynamic Panel Analysis of the Profitability of Australian Tax Entities," Melbourne Institute Working Paper Series wp2000n22, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  3. Ivaldi, Marc & Motis, Jrissy, 2007. "Mergers as Auctions," IDEI Working Papers 461, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Juan Carlos Bou & Albert Satorra, 2003. "The persistence of abnormal returns at industry and firm levels," Economics Working Papers 729, Department of Economics and Business, Universitat Pompeu Fabra.
  5. 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.
  6. Mita Bhattacharya & Harry Bloch, 2000. "Adjustment of Profits: Evidence from Australian Manufacturing," Empirica, Springer, vol. 27(2), pages 157-173, June.

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