Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v33y2001i10p1351-1357.html
   My bibliography  Save this article

Differential efficiency, market structure and price

Author

Listed:
  • Azzeddine Azzam
  • David Rosenbaum
Abstract
A persistent question in industrial economics is the underpinning of the link between market concentration and price. How much of the link can be attributed to market power and how much to market efficiency? This paper develops a theoretical model to address that question. Applied to the US portland cement industry, the model indicates that both impacts matter. In relative terms, however, the market power effect is twice as large as the efficiency effect. An implication for merger policy is that the beneficial efficiency effects of mergers may not be obtained without the detrimental market power effects as well.

Suggested Citation

  • Azzeddine Azzam & David Rosenbaum, 2001. "Differential efficiency, market structure and price," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1351-1357.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1351-1357
    DOI: 10.1080/00036840010006615
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840010006615
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840010006615?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Clarke, Roger & Davies, Stephen & Waterson, Michael, 1984. "The Profitability-Concentration Relation: Market Power or Efficiency?," Journal of Industrial Economics, Wiley Blackwell, vol. 32(4), pages 435-450, June.
    2. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
    3. repec:bla:jindec:v:45:y:1997:i:4:p:377-86 is not listed on IDEAS
    4. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
    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. Jans, Ivette & Rosenbaum, David I., 1997. "Multimarket contact and pricing: Evidence from the U.S. cement industry," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 391-412, May.
    7. Phillips, Almarin, 1976. "A Critique of Empirical Studies of Relations between Market Structure and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 24(4), pages 241-249, June.
    8. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
    9. Azzeddine M. Azzam, 1997. "Measuring Market Power and Cost‐efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-386, December.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Evens Salies, 2008. "Mergers in the GB electricity market: effects on retail charges," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1483-1490.
    2. Lawrence Southwick, 2005. "Economies of scale and market power in policing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(8), pages 461-473.
    3. repec:hal:spmain:info:hdl:2441/7068 is not listed on IDEAS
    4. Ian Sheldon & Steve McCorriston, 2012. "Climate policy and border tax adjustments: Might industrial organization matter?," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 9(2), pages 7-28, Julio-Dic.
    5. O'Shaughnessy, Eric, 2019. "Non-monotonic effects of market concentration on prices for residential solar photovoltaics in the United States," Energy Economics, Elsevier, vol. 78(C), pages 182-191.
    6. repec:spo:wpmain:info:hdl:2441/7068 is not listed on IDEAS
    7. John Ashton & Khac Pham, 2007. "Efficiency and Price Effects of Horizontal Bank Mergers," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2007-09, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    8. Şükrü Özen & Fatma Küskü, 2009. "Corporate Environmental Citizenship Variation in Developing Countries: An Institutional Framework," Journal of Business Ethics, Springer, vol. 89(2), pages 297-313, October.
    9. repec:hal:wpspec:info:hdl:2441/7068 is not listed on IDEAS
    10. repec:spo:wpecon:info:hdl:2441/7068 is not listed on IDEAS
    11. Yang, Sheng-Ping, 2005. "Market power and cost efficiency: the case of the US aluminum industry," Resources Policy, Elsevier, vol. 30(2), pages 101-106, June.
    12. Monroe, Kevin H., 2012. "Decomposition of Information and Communication Technology for Development: A Case for Investment in and Trade of Intellectual Property," Master's Theses and Plan B Papers 156572, University of Minnesota, Department of Applied Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chanjin Chung & Seongjin Park & Jungmin Lee, 2018. "Estimating bilateral market power of processors and retailers in the U.S. beef industry," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 771-792, October.
    2. Maximilian Koppenberg & Stefan Hirsch, 2022. "Markup estimation: A comparison of contemporary methods at the example of European food retailers," Agribusiness, John Wiley & Sons, Ltd., vol. 38(1), pages 108-133, January.
    3. Alessandro Bonanno & Carlo Russo & Luisa Menapace, 2018. "Market power and bargaining in agrifood markets: A review of emerging topics and tools," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 6-23, December.
    4. Ian Sheldon & Richard Sperling, 2003. "Estimating the Extent of Imperfect Competition in the Food Industry: What Have We Learned?," Journal of Agricultural Economics, Wiley Blackwell, vol. 54(1), pages 89-109, March.
    5. Schmalensee, Richard., 1985. "Testing the differential efficiency hypothesis," Working papers 1628-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Paolo Coccorese & Alfonso Pellecchia, 2010. "Testing the ‘Quiet Life’ Hypothesis in the Italian Banking Industry," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 39(3), pages 173-202, November.
    7. Perekhozhuk, Oleksandr & Chezhia, Giorgi & Glauben, Thomas, 2021. "Measuring Oligopsony Market Power in Kazakh Grain-Processing Industry: Converging Evidence from Two Structural Approaches," 2021 Conference, August 17-31, 2021, Virtual 315345, International Association of Agricultural Economists.
    8. Devin Garcia & Levent Kutlu & Robin C. Sickles, 2022. "Market Structures in Production Economics," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 13, pages 537-574, Springer.
    9. Chezhia, Giorgi & Perekhozhuk, Oleksandr & Glauben, Thomas, 2021. "Measuring oligopsonistic power in the Kazakh grain processing industry: Empirical evidence from the General Identification Method," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 22(3), pages 6-27.
    10. Bing Xu & Adrian Van Rixtel & Michiel Van Leuvensteijn, 2013. "Measuring bank competition in China: a comparison of new versus conventional approaches applied to loan markets," BIS Working Papers 422, Bank for International Settlements.
    11. Koppenberg, Maximilian & Hirsch, Stefan, 2020. "Comparing methods for markup estimation with an application to EU food retailing," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304272, Agricultural and Applied Economics Association.
    12. Delis, Manthos D. & Tsionas, Efthymios G., 2009. "The joint estimation of bank-level market power and efficiency," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1842-1850, October.
    13. Rigoberto A. Lopez & Azzeddine M. Azzam & Carmen Liron-Espana, 2001. "Market Power and/or Efficiency: An Application to U.S. Food Processing," Food Marketing Policy Center Research Reports 060, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    14. Thu A. T. Pham, 2018. "Industry Concentration, Firm Efficiency and Average Stock Returns: Evidence from Australia," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 25(3), pages 221-247, September.
    15. Chanjin Chung & Em Tostão, 2012. "Effects of horizontal consolidation under bilateral imperfect competition between processors and retailers," Applied Economics, Taylor & Francis Journals, vol. 44(26), pages 3379-3389, September.
    16. Isayenko Oleksiy & Maryanchyk Ivan, 2006. "Market power in oligopoly: The case of the Ukrainian cement industry," EERC Working Paper Series 06-06e, EERC Research Network, Russia and CIS.
    17. Soregaroli, Claudio & Sckokai, Paolo & Moro, Daniele, 2011. "Agricultural policy modelling under imperfect competition," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 195-212, March.
    18. Coccorese, Paolo, 2009. "Market power in local banking monopolies," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1196-1210, July.
    19. Yang, Sheng-Ping, 2005. "Market power and cost efficiency: the case of the US aluminum industry," Resources Policy, Elsevier, vol. 30(2), pages 101-106, June.
    20. Sheldon, Ian M., 2017. "The Competitiveness Of Agricultural Product And Input Markets: A Review And Synthesis Of Recent Research," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 49(1), pages 1-44, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:taf:applec:v:33:y:2001:i:10:p:1351-1357. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.