Review of Industrial Organization

, Volume 10, Issue 6, pp 737–747 | Cite as

Beta distributed market shares in a spatial model with an application to the market for audit services

  • Morten Hviid
  • Bente Villadsen
Article

Abstract

We show that if firms locate on a circle according to a uniform distribution, their market shares will be beta distributed. The result implies that concentration ratios will be skewed. We apply the result to the market for auditing services in the US and show the beta distribution outperforms other relevant distributions.

Key words

Concentration indices spatial product differentiation order statistics uniform distribution audit services 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Anderson, S. P. (1986), ‘Equilibrium Existence in the Circle Model of Product Differentiation’, in G. Norman (ed.),Spatial Pricing and Differentiated Markets, Pion Ltd., London.Google Scholar
  2. Cox, D. R. and D. V. Hinkley (1974),Theoretical Statistics, Chapman and Hall, London.Google Scholar
  3. David, H. A. (1970),Order Statistics, John Wiley & Sons, New York, NY.Google Scholar
  4. DeAngelo, L. E. (1981), ‘Auditor Independence, “Low Balling”, and Disclosure Regulation’,Journal of Accounting and Economics 3, 113–127.Google Scholar
  5. Economides, N. (1989), ‘Symmetric Equilibrium Existence and Optimality in Differentiated Product Markets’,Journal of Economic Theory 47, 178–194.Google Scholar
  6. Francis, J. R. and D. T. Simon (1987), ‘A Test of Audit Pricing in the Small-Client Segment of the U.S. Audit Market’,The Accounting Review 62, 145–157.Google Scholar
  7. Ireland, N. J. (1989), ‘Random Entry and Excessive Variety’, Mimeo, University of Warwick.Google Scholar
  8. Jarque, C. M. and A. K. Bera (1980), ‘Efficient Tests for Normality, Homoscedasticity and Serial Independence of Regression Residuals’,Economic Letters 6, 255–259.Google Scholar
  9. Martin, S. (1993),Advanced Industrial Economics, Blackwell.Google Scholar
  10. Mauldon, J. G. (1951), ‘Random Division of an Interval’,Proceedings of the Cambridge Philosophical Society 57, 331–336.Google Scholar
  11. Minyard, D. H. and R. H. Tabor (1991), ‘The Effect of Big Eight Mergers on Auditor Concentration’,Accounting Horizons 5, 79–90.Google Scholar
  12. Parker, S. C. (1991), ‘Significantly Concentrated Markets. Theory and Evidence for the U.K.’,International Journal of Industrial Organization 9, 585–590.Google Scholar
  13. Palmrose, Z-V. (1986), ‘Audit Fees and Auditor Size: Further Evidence’,Journal of Accounting Research 24, 97–110.Google Scholar
  14. Public Accounting Report (1992), ‘E&Y America's Top Accountant’,Public Accounting Report, July 15, 1992.Google Scholar
  15. Sleuwaegen, L. and W. Dehandschutter (1986), ‘The Critical Choice Between the Concentration Ratio and the H-Index in Assessing Industry Performance’,Journal of Industrial Economics 35, 193–208.Google Scholar
  16. Tirole, J. (1988),The Theory of Industrial Organization, MIT Press, Cambridge, MA.Google Scholar

Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • Morten Hviid
    • 1
  • Bente Villadsen
    • 2
  1. 1.Department of EconomicsUniversity of WarwickCoventryEngland
  2. 2.John M. Olin School of BusinessWashington University in St. LouisSt. LouisUSA

Personalised recommendations