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.