Market Structure and Price-Cost Margins

Clarke, Roger; Davies, Stephen

doi:10.2307/2553628

Cited by 179 publications

(90 citation statements)

References 9 publications

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“…This result is consistent with the positive relationship between industry concentration and profitability found by Dixit and Stern (1982) and Clarke and Davies (1982) for asymmetric-cost oligopoly equilibria with a fixed number of firms.…”

Section: The Elasticity Of Demand Decreases (Resp Increases) If the supporting

confidence: 91%

“…In response to demand shifts, we find that changes in industry profitability are positively-related to changes in incumbent output, and, when marginal costs are non-decreasing, inversely-related to changes in incumbent price-cost margins. In a wide range of circumstances, increased profitability is also associated with a decline in the equilibrium number of firms, whence increased profitability tends to occur with heightened industry concentration, as in Clarke and Davies (1982); Dansby and Willig (1979), and Dixit and Stern (1982).…”

Section: Introductionmentioning

confidence: 99%

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Demand shifts and market structure in free-entry oligopoly equilibria

Hamilton

1999

International Journal of Industrial Organization

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This papers examines the structural implications of demand shifts in free-entry oligopoly equilibria. The model generalizes the conjectural variations framework to consider asymmetric firm conjectures, allows for the possibility of cost differences across firms, and endogenizes conditions of entry and exit in the industry. In non-competitive environments, changes in incumbent output and industry profitability are inversely-related to changes in the equilibrium price following a demand shift. In response to rotations of demand through the equilibrium point, changes in profitability are positively-related to changes in industry concentration and, when marginal costs are non-decreasing, inversely-related to changes in market power.

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Section: The Elasticity Of Demand Decreases (Resp Increases) If the supporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Demand shifts and market structure in free-entry oligopoly equilibria

Hamilton

1999

International Journal of Industrial Organization

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“…Although no causality can be deduced from this formula, it has been adopted as a foundation for the "market power" rationale. Clarke and Davies (1982) further show that the Herfindhal concentration index increases with the variance of firms' marginal costs; this proves that concentration is greater when some firms have a cost advantage, a result that lands support to the dynamic efficiency rationale. In the same vein, Salant and Shaffer (1999) show that if the average marginal costs in the industry is constant, then so is aggregate output and consumer surplus.…”

Section: Contributionmentioning

confidence: 58%

On Efficiency, Concentration and Welfare

Boccard

2009

SSRN Journal

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The welfare impact of a merger involves the market power offense and the efficiency defense. Salant et al. (1983) show that mergers among symmetric firms are unprofitable except for monopolization. We characterize the limit to this merger paradox in a simple linear Cournot oligopoly with asymmetric costs. Farrell and Shapiro (1990) provide sufficient conditions for a profitable merger to increase welfare but leave open whether it exists. We characterize the degree of cost asymmetry making a merger both profitable and socially desirable. Comparing rationalization and synergy within the efficiency defense, we show that for most industry structures, a rationalization merger is more likely to be welfare enhancing but a synergy merger is more likely to be profitable.

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“…For the calculation of the concentration indices for the years 1995, 1996, 1997, 1998, 1999, 2000, 2001 and 2002, we have used the company directory of the National Institute (7) See Schmalensee (1977), Encaoua and Jacquemin (1980), Baumol et al (1982), Clark andy Davies (1982), Hirschey (1985), Jaumandreu and Mato (1985), Jaumandreu (1987), Scherer and Ross (1990), Schmalensee (1992), Gandoy (1988), andMartin (1993).…”

Section: Concentration Indicesmentioning

confidence: 99%

Spillovereffect upon a labor event: an empirical analysis for the Spanish continuous market

Marcos

Briones

2008

Spanish Journal of Finance and Accounting / Revista Española de

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RESUMEN El objetivo de este trabajo es analizar el efecto desbordamiento o spillover del Mercado Continuo Español ante la fi rma de un convenio colectivo a nivel empresa. Empíricamente, para el mercado español, se ha demostrado que un convenio de empresa incorpora información negativa para los inversores por el hecho de que este tipo de convenios sesga al alza los salarios respecto a los del sector, lo que conlleva la venta de los títulos afectados y una caída en su precio. Este trabajo analiza si este evento laboral tiene también contenido informativo para los inversores de las empresas competidoras, es decir, si existe efecto spillover. La llegada de la nueva información que contiene la fi rma del convenio podría afectar a las empresas competidoras de distinta forma dependiendo del sector. Los resultados generales de este trabajo confi rman esta hipótesis, si bien se observan reacciones distintas dependiendo del sector al cual pertenezca la empresa y del nivel de concentración de la oferta productiva que posean.PALABRAS CLAVE Efecto Industria; Negociación Colectiva; Rentabilidades Anormales; Competencia.ABSTRACT The aim of this paper is to analyse the reaction of the stock prices of competing companies to the signature of a fi rm-level collective agreement. Considering that this type of agreement slants to the rise the wages of these fi rms with respect to those of the sector, we have found empirical evidence that, for the Spanish Market, a fi rm-level agreement incorporates information that could be negatively considered by the investors of the companies which sign own agreement. This would entail a sale of the affected titles whose price would then fall. This paper analyses whether this event affects the stock price of competing companies, that is, whether a spillover effect exist. The arrival of the new information inherent in the signature of the agreement could have a different effect on competing companies based on the type of competition in their industry. The general results of this paper confi rm the spillover effect, although different reactions are observed depending on the industry to which the company belongs and their level of concentration.

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Market Structure and Price-Cost Margins

Cited by 179 publications

References 9 publications

Demand shifts and market structure in free-entry oligopoly equilibria

Demand shifts and market structure in free-entry oligopoly equilibria

On Efficiency, Concentration and Welfare

Spillovereffect upon a labor event: an empirical analysis for the Spanish continuous market

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