Abstract
A microeconomic pricing model is developed which explains the effects of industrial structures on profit margin and equity beta values. The model is placed into special use by illustrating what may appear to be contradictions in the stock prices and betas of specific companies, differences which are explained however by the theory that supports our model. The industrial organization theory established in the paper would therefore extend Finance Theory's Capital Asset Pricing Model. Many testable propositions which could disconfirm or fail to disconfirm certain facets of, if not the paper's basic theory, are set forth descriptively.
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Associate Professor, Finance and Business Economics, Arizona State University West; Distinguished Professor, Department of Economics, Texas A&M University. The authors wish to thank the two anonymous referees for their helpful comments.
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Greenhut, J.G., Greenhut, M.L. Industrial structures components of finance theory's CAPM. Review of Industrial Organization 7, 361–373 (1992). https://doi.org/10.1007/BF00353402
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DOI: https://doi.org/10.1007/BF00353402