Abstract
The empirical analysis of the relationship between pricing behaviour and market structure has a distinguished tradition in industrial economics. The size of markups of price over marginal or average costs has been the traditional indicator for market power in most empirical studies usually based on a cross-section of industries (for a survey see Schmalensee 1989). The standard explanation given for inter-industry differences in markups has usually been the existence of entry barriers arising from scale economies (see Scherer 1980 for a survey). Although no concurring opinion on the proper interpretation or even the existence of a positive relationship between industry markups and market concentration seems to have emerged so far, it remains the basis for the predominance of the structure-conduct-performance paradigm in empirical industrial economics (see Schmalensee 1989 for a comprehensive survey). A related issue that has been extensively investigated within this approach is the cyclical variation in markups and prices and its dependence on market structure (see Scherer 1980, Ch. 13, Carlton 1989) although here too, judging from the literature, no unambiguous results seem to be available.
We thank Klaus Conrad, our discussant at the Second Munich Applied Econometrics Workshop, for helpful comments and Georg Licht for numerous useful discussions and for providing essential data. Helpful suggestions were also received from seminar participants at the University of Augsburg, the University of Munich and the Austrian Institute of Economic Research (WIFO), Vienna.
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Flaig, G., Steiner, V. (1993). Markup Differentials, Cost Flexibility, and Capacity Utilization in West-German Manufacturing. In: Schneeweiß, H., Zimmermann, K.F. (eds) Studies in Applied Econometrics. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-51514-9_7
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DOI: https://doi.org/10.1007/978-3-642-51514-9_7
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