Summary
This paper examines the relationship between price-cost margins, foreign trade, domestic market structure, and the business cycle for a panel of 43 U.S. food manufacturing industries from 1972 to 1987. Our empirical findings support the negative influence of price elasticity of domestic demand and the positive influence of seller concentration on price-cost margins in the industry. International trade significantly influenced margins; a positive relationship between import share and margins and a negative effect of exports suggests that expanding exports rather than increasing import penetration results in competitive pressure from abroad. Finally, regarding the business cycle, price-cost margins exhibited counter cyclical behavior at the national level while behaving procyclically at the industry level.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bils M., 1987, “The Cyclical Behavior of Marginal Cost and Price”, American Economic Review, 77, Dec, pp. 838–855.
Caves R.E., 1974, International Trade, International Investment and Imperfect Markets, Selected Papers in International Economics, Princeton University.
Caves R.E., 1985, “International Trade and Industrial Organization Problems, Solved and Unsolved”, European Economic Review, 28, pp. 377–395.
Clarke R., Davies S.W., 1982, “Market Structure and Price-Cost Margins”, Economica, 49, pp. 277–287.
Cowling K., Waterson M., 1976, “Price-Cost Margins and Market Structure”, Economica, 43, pp. 267–274.
DeRosa D., Goldstein M., 1981, Import Discipline in the U.S. Manufacturing Sector, International Monetary Fund Staff Papers, 28, Sept, pp. 600–634.
DeGhellinck E., Geroski P.A., Jacquemin A., 1988, “Inter-Industry variations in the Effect of Trade on Industry Performance”, The Journal of Industrial Economics, 37, 1, Sept, pp. 1–19.
Demsetz H., 1974, “Market Rivalry and Public Policy”, Journal of Law and Economics, pp. 1–9.
Domowitz I., Hubbard R.G., Peterson B.C., 1986a, “Business Cycles and the relationship between Concentration and Price-Cost Margins”, Rand Journal of Economics, 17, l, pp. 1–17.
Domowitz I., Hubbard R.G., Peterson B.C., 1986b, “The Intertemporal Stability of the Concentration Margins Relationship”, Journal of Industrial Economic, 35, pp. 13–34.
Geroski P.A., Jacquemin A., 1981, Imports as a Competitive Discipline, Recherches Economiques de Louvain, 47, pp. 197–208.
Handy C.R., Henderson D.R., 1992, Foreign Investment in Food Manufacturing, Occasional Paper No. 41, NC-194: Organization and Performance of World Food Systems, October.
Haubrich J., Lambson V.E., 1986, “Dynamic Collusion in an Open Economy”, Economics Letters, 20, pp. 75–78.
Huveneers C., 1981, Price Formation and the Scope for Oligopolistic Conduct in a Small Open Economy, Recherches Economiques de Louvain, Working Paper No. 8115.
Jacquemin A., 1982, Imperfect Market Structure and International Trade — Some Recent Research, Kyklos 35, pp. 75–93.
Levinsohn J., 1991, Testing the Imports-as-Market-Discipline Hypothesis, National Bureau of Working Paper Series, Working Paper No. 3657, March.
Lyons B., 1981, “Price-Cost Margins, Market Structure and International Trade”, in Currie D., Peel D., Peters W. (eds), Microeconomic Analysis: Essays in Microeconomics and Economic Development, London: Croom Helm.
Mills D.E., Schumann L., 1985, “Industry Structure and Fluctuating Demand”, American Economic Review, 75 (1985), pp. 758–767.
Neumann M., Böbel I., Haid A., 1985, “Domestic Concentration, Foreign Trade and Economic Performance”, International Journal of Industrial Organization, 3, pp. 1–19.
Pagoulatos E., Sorensen R., 1981, “A Simultaneous Equation Analysis of Advertising, Concentration and Profitability”, Southern Economic Journal, 47, pp. 758–767.
Pagoulatos E., Sorensen R., 1986, “What Determines the Elasticity of Industry Demand?”, International Journal of Industrial Organization, 4, pp. 237–250.
Pugel T.A., 1980, “Foreign Trade and US Market Performance”, The Journal of Industrial Economics, 29, Dec, pp. 119–129.
Reed M.R., Marchant M.A., 1992, “The Global Competitiveness of the U.S. Food-Processing Industry”, Northeastern Journal of Agricultural and Resource Economics, 21, April, pp. 61–70.
Rotemberg J.J., Saloner G., 1986, “A Supergame-Theoretical Model of Price Wars during Booms”, American Economic Review, 76, pp. 390–407.
Salinger M., 1990, The Concentration-Margins Relationship Reconsidered, Brookings Papers on Economic Activity: Microeconomics, pp. 287–335.
Schmalensee R., 1989a, “Inter-Industry Studies of Structure and Performance”, in R. Schmalensee and R.D. Willig, (eds), Handbook of Industrial Organization, Vol II, Amsterdam: North-Holland.
Schmalensee R., 1989b, “Intra-Industry Studies of Structure and Performance”, Journal of Industrial Economics, 37, pp. 337–357.
Stalhammar N.-O., 1991, “Domestic Market Power and Foreign Trade”, International Journal of Industrial Organization, 9, Sept, pp. 407–424.
Stigler G.J., 1964, “A Theory of Oligopoly”, Journal of Political Economy, 72, Feb, pp. 44–61.
Sugden R., 1983, “The Degree of Monopoly, International Trade, and Transnational Corporation”, International Journal of Industrial Organization, 1, pp. 165–187.
Urata S., 1979, “Price-Cost Margins and Foreign Trade in U.S. Textile and Apparel Industries An Analysis of Pooled Cross-Section and Time-Series Data”, Economics Letters, 4, pp. 279–282.
Urata S., 1984, “Price-Cost Margins and Imports in an Oligopolistic Market”, Economics Letters, 15, pp. 139–144.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1996 Physica-Verlag Heidelberg
About this paper
Cite this paper
Field, M.K., Pagoulatos, E. (1996). Internationalization and Competition in the Food Industry. In: Galizzi, G., Venturini, L. (eds) Economics of Innovation: The Case of Food Industry. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-50001-5_11
Download citation
DOI: https://doi.org/10.1007/978-3-642-50001-5_11
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-0911-4
Online ISBN: 978-3-642-50001-5
eBook Packages: Springer Book Archive