IDEAS home Printed from
   My bibliography  Save this paper

Concentration Measures as an element in testing the structure-conduct-performance paradigm


  • Johann du Pisanie


The original structure-conduct-performance (SCP) paradigm, according to which market structure determines market conduct and market conduct determines market performance, underlies numerous competition policies. Since its development almost a century ago, the paradigm has been heavily criticised and numerous efforts have been made to test it by correlating measures of seller concentration with measures of market performance. The reliability of seller concentration measures that are frequently used, particularly in South Africa, was tested against the Hannah and Kay criteria, using hypothetical numbers of sellers and market shares. The premise is that a concentration measure must be reliable in the sense that it should lead to a correct conclusion when the relevant concentration curves do NOT cross. The following absolute concentration measures were found to meet the criteria: the Herfindahl-Hirschman index (HHI), the other Hannah and Kay indices [HKI(α)], the Rosenbluth index (RI), the numbers equivalent of the Hannah and Kay indices [HKIne(α)] and the entropy coefficient (EC). The discrete measures, concentration ratios (CRX) and the occupancy count (CRX%), do not always meet the criteria, nor do the relative concentration measures or measures of inequality, namely the Gini coefficient (GC), the variance of logarithms of market shares (VL) and the relative entropy coefficient (REC). The Horvath index (HI), an absolute concentration measure, does not always meet the criteria. Studies that employed the unreliable measures should be disregarded or reworked and students should be forewarned against the use of such measures.

Suggested Citation

  • Johann du Pisanie, 2013. "Concentration Measures as an element in testing the structure-conduct-performance paradigm," Working Papers 345, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:345

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rza:wpaper:345. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Tanton). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.