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Specification and Testing the Profit-Concentration Relationship in Australian Manufacturing


Bhattacharya, M and Bloch, HB, Specification and Testing the Profit-Concentration Relationship in Australian Manufacturing, Review of Industrial Organization, 12, (2) pp. 219-230. ISSN 0889-938X (1997) [Refereed Article]

DOI: doi:10.1023/A:1007710622023


Research in the mainstream of industrial organization has tested the relationship between profit rates (an index of performance) and concentration (an index of structure) including other variables (e.g., capital intensity, advertising intensity, growth, measures for barriers to entry, import and export intensity). Specification of this relationship is often largely ad hoc and its testing is subject to a number of statistical criticisms. Major criticisms that require attention are: i) omission of the relevant explanatory variables, ii) simultaneous causality among variables, and iii) measurement error in the variables. This paper derives a profit-concentration relationship from a well known oligopoly model. Empirical analysis is carried out against a sample of Australian manufacturing industries for 1984-85. The resulting estimates suggest the importance of dealing with each of the specification and testing issues in explaining the profit-concentration relationship. © 1997 Kluwer Academic Publishers.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied economics
Research Field:Industry economics and industrial organisation
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Industry costs and structure
UTAS Author:Bloch, HB (Professor Harry Bloch)
ID Code:11608
Year Published:1997
Web of Science® Times Cited:12
Deposited By:Economics and Finance
Deposited On:1997-08-01
Last Modified:2011-08-12

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