Review of Industrial Organization

, Volume 40, Issue 2, pp 87–108 | Cite as

Market Structure and Market Performance

Article
First Online:

Abstract

I review studies of the determinants of market performance in the aircraft, passenger airline, supermarket, liner shipping, and hospital industries, and of mergers and market performance in markets for fast food, soft drinks, and retail gasoline. Common factors are that more competitive market structures accompany better market performance, and that firm conduct and industry-specific factors play independent roles.

Keywords

Market structure Competition Performance 

JEL Classification

L11 L13 L41 
This is a preview of subscription content, log in to check access.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Adelman M. A. (1969) Comment on the ‘H’ concentration measure as a numbers equivalent. Review of Economics and Statistics 51(1): 99–101CrossRefGoogle Scholar
  2. Agarwal R., Gort M. (1996) The evolution of markets and entry, exit and survival of firms. Review of Economics and Statistics 78(3): 489–498CrossRefGoogle Scholar
  3. Aguirregabiria, V. & Ho, C.-Y. (2012). A dynamic oligopoly game of the U.S. airline industry: estimation and policy experiments. Journal of Econometrics (in press).Google Scholar
  4. Andrews P. W. S. (1951) Industrial analysis in economics. In: Wilson T., Andrews P. W. S. (eds) Oxford studies in the price mechanism. Clarendon Press, Oxford, pp 139–172Google Scholar
  5. Ashenfelter O. C., Hosken D. S. (2010) The effect of mergers on consumer prices: Evidence from five mergers on the enforcement margin. Journal of Law and Economics 53(3): 417–466CrossRefGoogle Scholar
  6. Ashenfelter, O. C., Hosken, D. S., & Weinberg, M. C. (2011). The price effects of a large merger of manufacturers. NBER working paper 17476.Google Scholar
  7. Bailey E. E., Graham D. R., Kaplan D. P. (1985) Deregulating the airlines. MIT Press, CambridgeGoogle Scholar
  8. Barron J. M., Umbeck J. R. (1984) The effects of different contractual arrangements: The case of retail gasoline markets. Journal of Law and Economics 27(2): 313–328CrossRefGoogle Scholar
  9. Basker E. (2007) The causes and consequences of Wal-Mart’s growth. Journal of Economic Perspectives 21: 177–198CrossRefGoogle Scholar
  10. Benkard C. L. (2004) A dynamic analysis of the market for wide-bodied aircraft. Review of Economic Studies 71(3): 581–611CrossRefGoogle Scholar
  11. Berry S., Jia P. (2010) Tracing the woes: An empirical analysis of the airline industry. American Economic Journal: Microeconomics 2: 1–43CrossRefGoogle Scholar
  12. Bilotkach, V. & Hüschelrath, K. (2010) Airline alliances, antitrust immunity and market foreclosure. ZEW discussion paper 10-083.Google Scholar
  13. Bilotkach V., Hüschelrath K. (2011a) Antitrust immunity for airline alliances. Journal of Competition Law & Economics 7(2): 335–380CrossRefGoogle Scholar
  14. Bilotkach V., Hüschelrath K. (2011b) Multimarket contact and intensity of competition: Evidence from an airline merger. Review of Industrial Organization 38(1): 95–115CrossRefGoogle Scholar
  15. Bloom, N., Propper, C., Seiler, S., & Van Reenen, J. (2010). The impact of competition on management quality: Evidence from public hospitals. NBER working paper 16032.Google Scholar
  16. Bonanno A., Lopez R. A. (2009) Competition effects of supermarket services. American Journal of Agricultural Economics 91(3): 555–568CrossRefGoogle Scholar
  17. Boone J. (2008) Competition: Theoretical parameterizations and empirical measures. Journal of Institutional and Theoretical Economics 164(4): 587–611CrossRefGoogle Scholar
  18. Bresnahan T. F., Reiss P. C. (1991) Entry and competition in concentrated markets. Journal of Political Economy 99: 977–1009CrossRefGoogle Scholar
  19. Brueckner J. K. (2001) The economics of international codesharing: An analysis of airline alliances. International Journal of Industrial Organization 19(10): 1475–1498CrossRefGoogle Scholar
  20. Brueckner J. K. (2003) International airfares in the age of alliances: The effects of codesharing and antitrust immunity. Review of Economics and Statistics 85(1): 105–118CrossRefGoogle Scholar
  21. Brueckner J. K., Proost S. (2010) Carve-outs under airline antitrust immunity. International Journal of Industrial Organization 28(6): 657–668CrossRefGoogle Scholar
  22. Brueckner J. K., Whalen W. T. (2000) The price effects of international airline alliances. Journal of Law and Economics 43(3): 503–546CrossRefGoogle Scholar
  23. Budzinski O., Ruhmer I. (2010) Merger simulation in competition policy: A survey. Journal of Competition Law & Economics 6(2): 277–319CrossRefGoogle Scholar
  24. Call G. D., Keeler T. E. (1985) Airline deregulation, fares, and market behavior: Some empirical evidence. In: Daughety A. F. (eds) Analytical studies in transport economics. Cambridge University Press, Cambridge, pp 221–247Google Scholar
  25. Ciliberto F., Tamer E. (2009) Market structure and multiple equilibria in airline markets. Econometrica 77(6): 1791–1828CrossRefGoogle Scholar
  26. Clyde, P. S. & Reitzes, J. D. (1995). The effectiveness of collusion under antitrust immunity: The case of liner shipping conferences. Bureau of Economics Staff Report, Federal Trade Commission.Google Scholar
  27. Clyde P. S., Reitzes J. D. (1998) Market power and collusion in the ocean shipping industry: Is a bigger cartel a better cartel?. Economic Inquiry 36(2): 292–304CrossRefGoogle Scholar
  28. Cowling K., Mueller D. C. (1978) The social costs of monopoly power. Economic Journal 88: 727–748CrossRefGoogle Scholar
  29. David P. A. (1985) Clio and the economics of QWERTY. American Economic Review 75(2): 332–337Google Scholar
  30. Davis, D. E. (2010) Prices, promotions, and supermarket mergers. Journal of Agricultural & Food Industrial Organization, 8(1), 8.Google Scholar
  31. Deltas G., Serfes K., Sicotte R. (1999) American shipping cartels in the pre-World War I era. Research in Economic History 19: 1–38Google Scholar
  32. Dubé J.-P. (2005) Product differentiation and mergers in the carbonated soft drink industry. Journal of Economics & Management Strategy 14(4): 879–904CrossRefGoogle Scholar
  33. Economides, N., & Flyer, F. (1998). Compatibility and market structure for network goods. Discussion paper EC-98-02, Stern School of Business, New York University.Google Scholar
  34. Einav, L. & Nevo, A. (2006). Empirical models of imperfect competition: A discussion. In R. Blundell, W. K. Newey & T. Prsson (Eds.), Advances in economics and econometrics: Theory and applications ninth world congress, (Vol. II, pp. 86–96). Cambridge: Cambridge University Press.Google Scholar
  35. Ellickson P. B. (2006) Quality competition in retailing: A structural analysis. International Journal of Industrial Organization 24(3): 521–540CrossRefGoogle Scholar
  36. Ellickson P. B. (2007) Does Sutton apply to supermarkets?. RAND Journal of Economics 38(1): 43–59CrossRefGoogle Scholar
  37. Ericson R., Pakes A. (1995) Markov-perfect industry dynamics: A framework for empirical work. Review of Economic Studies 62(1): 53–82CrossRefGoogle Scholar
  38. Evans W. N., Kessides I. N. (1994) Living by the ‘golden rule’: Multimarket contact in the U.S. airline industry. Quarterly Journal of Economics 109(2): 341–366CrossRefGoogle Scholar
  39. Federal Trade Commission. (2004). Petroleum Industry: Mergers, structural change and antitrust enforcement. Washington, DCGoogle Scholar
  40. Fisher F. M., McGowan J. J. (1983) On the misuse of accounting rates of return to infer monopoly profits. American Economic Review 73: 82–97Google Scholar
  41. Fisher F. M. (1987) On the misuse of the profit-sales ratio to infer monopoly power. RAND Journal of Economics 18(3): 384–396CrossRefGoogle Scholar
  42. Fox N. R., White L. J. (1997) U.S. ocean shipping policy: Going against the tide. Annals of The American Academy of Political and Social Science 553: 75–86CrossRefGoogle Scholar
  43. Gayle P. G. (2007) Airline code-share alliances and their competitive effects. Journal of Law and Economics 50: 781–819CrossRefGoogle Scholar
  44. Gaynor M., Vogt W. B. (2003) Competition among hospitals. RAND Journal of Economics 34(4): 764–785CrossRefGoogle Scholar
  45. Geroski P. A. (1995) What do we know about entry?. International Journal of Industrial Organization 13(4): 421–440CrossRefGoogle Scholar
  46. Geweke, J. (2003). Empirical evidence on the competitive effects of mergers in the gasoline industry. From http://www.ftc.gov/bc/gasconf/comments2/gewecke1.pdf. Retrieved 12 June 2008.
  47. Goolsbee A., Syverson C. (2008) How do incumbents respond to the threat of entry? Evidence from the major airlines. Quarterly Journal of Economics 123(4): 1611–1633CrossRefGoogle Scholar
  48. Gugler K., Mueller D. C., Yurtoglu B. B., Zulehner C. (2003) The effects of mergers: An international comparison. International Journal of Industrial Organization 21(5): 625–653CrossRefGoogle Scholar
  49. Hall R. E. (1988) The relation between price and marginal cost in U.S. industry. Journal of Political Economy 96(5): 47–921CrossRefGoogle Scholar
  50. Harberger A. C. (1954) Monopoly and resource allocation. American Economic Review 44(2): 75–87Google Scholar
  51. Hastings J. S., Gilbert R. J. (2005) Market power, vertical integration and the wholesale price of gasoline. Journal of Industrial Economics 53(4): 469–492CrossRefGoogle Scholar
  52. Hausman J. A. (1997) Valuation of new goods under perfect and imperfect competition. In: Bresnahan T. F., Gordon R. J. (eds) The economics of new goods. University of Chicago Press, Chicago and London, pp 209–237Google Scholar
  53. Hausman J., Leibtag E. (2007) Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal-Mart. Journal of Applied Econometrics 22: 1157–1177CrossRefGoogle Scholar
  54. Hausman J. A., Leonard G., Zona J. D. (1992) A proposed method for analyzing competition among differentiated products. Antitrust Law Journal 60: 889–900Google Scholar
  55. Hausman J. A., Leonard G., Zona J. D. (1994) Competitive analysis with differentiated products. Annales d’ Économie et de Statistique 34: 159–180Google Scholar
  56. Hausman J. A., Newey W. (1998) Nonparametric estimation of exact consumer surplus and deadweight loss. In: Strøm Steinar (eds) Econometrics and economic theory in the 20th century. Cambridge University Press, Cambridge, pp 111–116Google Scholar
  57. Hay D. A., Liu G. S. (1997) The efficiency of firms: What difference does competition make?. Economic Journal 107: 597–617CrossRefGoogle Scholar
  58. Hayek F. A. (1948) The meaning of competition. In: Hayek F. A. (eds) Individualism and economic order. University of Chicago Press, Chicago, pp 92–106Google Scholar
  59. Hayek, F. A. (1960). The decline of socialism and the rise of the welfare state. In F. A. Hayek, The caonstitution of Liberty (pp. 253–266). Chicago: University of Chicago Press.Google Scholar
  60. Hazledine T., Siegfried J. J. (1997) How did the wealthiest New Zealanders get so rich?. New Zealand Economic Papers 31(1): 35–47CrossRefGoogle Scholar
  61. Hendricks K., Piccione M., Tan G. (1997) Entry and exit in hub-spoke networks. RAND Journal of Economics 28(2): 291–303CrossRefGoogle Scholar
  62. Holmes T. J. (2011) The diffusion of Wal-Mart and economies of density. Econometrica 79(1): 253–302CrossRefGoogle Scholar
  63. Irwin D. A., Pavcnik N. (2004) Airbus versus Boeing revisited: International competition in the aircraft market. Journal of International Economics 64: 223–245CrossRefGoogle Scholar
  64. Jia P. (2008) What happens when Wal-Mart comes to town: An empirical analysis of the discount retailing industry. Econometrica 76(6): 1263–1316CrossRefGoogle Scholar
  65. Kessler D. P., McClellan M. B. (2000) Is hospital competition socially wasteful?. Quarterly Journal of Economics 115(2): 577–615CrossRefGoogle Scholar
  66. Klette T. J. (1999) Market power, scale economies and productivity: Estimates from a panel of establishment data. Journal of Industrial Economics 48(4): 76–451Google Scholar
  67. Knight F. H. (1935) The ethics of competition. Harper & Brothers, New YorkGoogle Scholar
  68. Knight F. H. (1946) Immutable law in economics: Its reality and limitations. American Economic Review 36(2): 93–111Google Scholar
  69. Lerner A. P. (1934) The concept of monopoly and the measurement of monopoly power. Review of Economic Studies 1(3): 157–175CrossRefGoogle Scholar
  70. Lynk W. J. (1995) Nonprofit hospital mergers and the exercise of market power. Journal of Law and Economics 38(2): 437–461CrossRefGoogle Scholar
  71. MacGregor D. H. (1909) Shipping conferences. Economic Journal 19(76): 503–516CrossRefGoogle Scholar
  72. Marin P. L., Sicotte R. (2003) Exclusive contracts and market power: Evidence from ocean shipping. Journal of Industrial Economics 51: 193–213CrossRefGoogle Scholar
  73. Martin S. (1984) The misuse of accounting rates of return: Comment. American Economic Review 74(3): 501–506Google Scholar
  74. Martin S. (1988) The measurement of profitability and the diagnosis of market power. International Journal of Industrial Organization 6(3): 301–321CrossRefGoogle Scholar
  75. McGee J. S. (1960) Ocean freight conferences and American merchant marine. University of Chicago Law Review 27: 191–314CrossRefGoogle Scholar
  76. McNulty P. J. (1967) A note on the history of perfect competition. Journal of Political Economy 75(4, Part 1): 395–399CrossRefGoogle Scholar
  77. McNulty P. J. (1968) Economic theory and the meaning of competition. Quarterly Journal of Economics 82(4): 639–656CrossRefGoogle Scholar
  78. Morrison S. A. (2001) Actual, adjacent, and potential competition: Estimating the full effect of Southwest Airlines. Journal of Transport Economics and Policy 32(2): 239–256Google Scholar
  79. Nickell S. J. (1996) Competition and corporate performance. Journal of Political Economy 104(4): 724–746CrossRefGoogle Scholar
  80. Pakes A., McGuire P. (1994) Computing Markov-Perfect Nash equilibria: Numerical implications of a dynamic differentiated product model. RAND Journal of Economics 25(4): 555–589CrossRefGoogle Scholar
  81. Pautler P. (2003) Evidence on mergers and acquisitions. Antitrust Bulletin 48(1): 119–207Google Scholar
  82. Peters C. (2006) Evaluating the performance of merger simulation: Evidence from the U.S. airline industry. Journal of Law and Economics 49(2): 627–649CrossRefGoogle Scholar
  83. Petrin A. (2002) Quantifying the benefits of new products: The case of the minivan. Journal of Political Economy 110(4): 705–729CrossRefGoogle Scholar
  84. Pirrong S. C. (1992) An application of core theory to the analysis of ocean shipping markets. Journal of Law and Economics 35: 89–131CrossRefGoogle Scholar
  85. Podolny J. M., Scott Morton F. M. (1999) Social status, entry and predation: The case of British shipping cartels 1879–1929. Journal of Industrial Economics 47(1): 41–67CrossRefGoogle Scholar
  86. Reitzes J. D., Sheran K. L. (2002) Rolling seas in liner shipping. Review of Industrial Organization 20(1): 51–59CrossRefGoogle Scholar
  87. Roberts M. J., Supina D. (2000) Output price and markup dispersion in micro data: The roles of producer heterogeneity and noise. In: Baye M. (eds) Advances in applied microeconomics 9, industrial organization. JAI Publishers, Greenwich, pp 1–35Google Scholar
  88. Rosse, J. N. & Panzar, J. C. (1977). Chamberlin versus Robinson: An empirical test for monopoly rents. Studies in industry economics no. 77. Department of Economics, Stanford University.Google Scholar
  89. Sagers C. (2006) The demise of regulation in ocean shipping: A study in the evolution of competition policy and the predictive power of microeconomics. Vanderbilt Journal of Transnational Law 39: 779–818Google Scholar
  90. Scherer F. M. (2006) A new retrospective on mergers. Review of Industrial Organization 28(4): 327–341CrossRefGoogle Scholar
  91. Schulz, N. (2007). Review of the literature on the impact of mergers on innovation. ZEW discussion paper no. 07-061.Google Scholar
  92. Scott Morton F. (1997) Entry and predation: British shipping cartels 1879–1929. Journal of Economics and Management Strategy 6: 679–724CrossRefGoogle Scholar
  93. Shaffer S. (1983) The Rosse-Panzar statistic and the Lerner index in the short run. Economics Letters 11: 175–178CrossRefGoogle Scholar
  94. Siegfried J. J., Blitz R. C., Round D. K. (1995) The limited role of market power in generating great fortunes in Great Britain, the United States, and Australia. Journal of Industrial Economics 43(3): 277–286CrossRefGoogle Scholar
  95. Simpson J., Taylor C. (2008) Do gasoline mergers affect consumer prices? The Marathon Ashland petroleum and Ultramar Diamond Shamrock transaction. Journal of Law and Economics 51(1): 135–152CrossRefGoogle Scholar
  96. Sjostrom W. (2004) Ocean shipping cartels: A survey. Review of Network Economics 3(2): 107–134CrossRefGoogle Scholar
  97. Sjostrom, W. (2009). Competition and cooperation in liner shipping. Centre for policy studies, University College Cork, National University of Ireland, working paper 2009-02.Google Scholar
  98. Smith H. (2004) Supermarket choice and supermarket competition in market equilibrium. Review of Economic Studies 71(1): 235–263CrossRefGoogle Scholar
  99. Smith J. R. (1906) Ocean freight rates and their control by line carriers. Journal of Political Economy 14: 525–541CrossRefGoogle Scholar
  100. Sutton J. (1991) Sunk costs and market structure. MIT Press, Cambridge, MassachusettsGoogle Scholar
  101. Syverson C. (2011) What determines productivity?. Journal of Economic Literature 49(2): 326–365CrossRefGoogle Scholar
  102. Telser L. G. (1978) Economic theory and the core. University of Chicago Press, Chicago and LondonGoogle Scholar
  103. Telser L. G. (1994) The usefulness of core theory in economics. Journal of Economic Perspectives 8(2): 151–164CrossRefGoogle Scholar
  104. Thomadsen R. (2005) The effect of ownership structure on prices in geographically differentiated industries. RAND Journal of Economics 36(4): 908–929Google Scholar
  105. Townley C. (2004) The liner shipping block exemptions in European law: Has the tide turned?. World Competition 27(1): 107–153Google Scholar
  106. U.S. General Accounting Office. (1995). Airline alliances produce benefits, but effect on competition is uncertain.Google Scholar
  107. Vickers J. (1995) Concepts of competition. Oxford Economic Papers 47(1): 1–23Google Scholar
  108. Vives X. (2008) Innovation and competitive pressure. Journal of Industrial Economics 56(3): 419–469CrossRefGoogle Scholar
  109. Weinberg M. (2008) The price effects of horizontal mergers. Journal of Competition Law & Economics 4(2): 433–447CrossRefGoogle Scholar
  110. Weiss L. W. (1971) Quantitative studies of industrial organization. In: Intriligator M. D. (eds) Frontiers of quantitative economics. North Holland, Amsterdam, pp 362–403Google Scholar
  111. Whalen T. W. (2007) A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets. Review of Industrial Organization 30(1): 39–61CrossRefGoogle Scholar
  112. Yong J.-S. (1996) Excluding capacity-constrained entrants through exclusive dealing: Theory and an application to ocean shipping. Journal of Industrial Economics 44(2): 115–129CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  1. 1.Department of Economics, Krannert School of ManagementPurdue UniversityWest LafayetteUSA

Personalised recommendations