Ilmakunnas, Pekka (2006): Lower bounds of concentration in a small open economy.
Download (281kB) | Preview
We examine how Sutton’s “bounds” approach works in a small country where industries have relatively high export and import intensities. Import competition is used as an indicator for the degree of competition in the low sunk cost industries. The bounds are estimated as stochastic frontiers, where observable industry characteristics, export intensity and entry barriers, are allowed to affect the mean and variance of the deviations from the frontier. In accordance with the theory, high R&D intensity industries have a lower bound for concentration, which is higher than that for low sunk cost intensity industries. For high advertising industries the theory does not hold as well. High import competition leads to a higher bound in the low sunk cost industries.
|Item Type:||MPRA Paper|
|Original Title:||Lower bounds of concentration in a small open economy|
|Keywords:||concentration; sunk costs; R&D; stochastic frontiers|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms
|Depositing User:||Pekka Ilmakunnas|
|Date Deposited:||21. Feb 2007|
|Last Modified:||21. Feb 2013 03:54|
Amemiya, T., Advanced Econometrics, Harvard University Press, 1985 Davies, S., ”Concentration”, in S. Davies et al., Economics of Industrial Organisation, Longman, 1989, 73-126 Duetsch, L.L., “Entry and the extent of multiplant operations”, Journal of Industrial Economics 32, 1984, 477-487 Giorgetti, M. L., Lower bound estimation – quantile regression and simplex method: An application to Italian manufacturing sectors”, Journal of Industrial Economics 51, 2003, 113-120 Kumbhakar, S.C. and Lovell, C.A.K., Stochastic Frontier Analysis, Cambridge University Press, 2000 Lyons, B. and Matraves, C., ”Industrial concentration”, in S. Davies, B. Lyons et al., Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism, Oxford University Press, 1996, 86-104 Lyons, B., Matraves, C., and Moffatt, P., “Industrial concentration and market integration in the European Union”, Economica 68, 2001, 1-26 Marin, P. L. and Siotis, G., “Innovation and market structure: An empirical evaluation of the ‘bounds approach’ in the chemical industry”, CEPR Discussion Paper No. 3162, 2002 Robinson, W.T. and Chiang, J., ”Are Sutton’s predictions robust?: Empirical insights into advertising, R&D, and concentration”, Journal of Industrial Economics 44, 1996, 389- 408 Sutton, J., Sunk Costs and Market Structure – Price Competition, Advertising and the Evolution of Concentration, MIT Press, 1991 Sutton, J., Technology and Market Structure – Theory and History, MIT Press, 1998 Sutton, J., “Market structure: The bounds approach”, in M. Armstrong and R. Porter, eds., Handbook of Industrial Organization, vol. 3, Elsevier, 2006 (forthcoming) Symeonidis, G., ”Price competition and market structure: The impact of cartel policy on concentration in the UK”, Journal of Industrial Economics 48, 2000, 1-26 Wahlroos, B. and Backström, M., ”R&D intensity with endogenous concentration: Evidence for Finland”, Empirical Economics 7, 1982, 13-22 Wang, H.-J., “Heteroscedasticity and non-monotonic efficiency effects of a stochastic frontier model”, Journal of Productivity Analysis 18, 2002, 241-253