DP2308 Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK

Author(s): George Symeonidis
Publication Date: December 1999
Keyword(s): Cartels, Exogenous and Endogenous Sunk Costs, Market Structure, Price Competition, UK Manufacturing
JEL(s): L10
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2308

This paper examines the impact of firms' conduct on market structure. It studies the evolution of concentration in UK manufacturing following the abolition of cartels using a theoretical framework based on Sutton's theory of market structure and a panel data set of four-digit industries over 1958-1977. The econometric results suggest that the intensity of price competition has a positive impact on concentration in exogenous sunk cost industries as well as in advertising-intensive and R&D-intensive industries. The concentration-market size relationship, while negative in exogenous sunk cost industries, breaks down in industries with high advertising or R&D intensity.