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- Title
ORGANIZATIONAL COSTS, 'STICKY EQUILIBRIA,' AND CRITICAL LEVELS OF CONCENTRATION.
- Authors
Bradburd, Ralph M.; Over Jr., A. Mead
- Abstract
The article discusses organizational costs and critical levels of market concentration. In thirty years since economist Joe Bain's seminal study, many economists have attempted to determine whether or not there exists a critical level of market concentration at which a discontinuity occurs in the relation between industry concentration and profitability. In this paper authors have developed and tested a more general model, based on organizational costs, which posits the existence of two critical levels of market concentration, one at which an existing cooperative equilibrium will break down as concentration declines and one at which a cooperative equilibrium will become attainable as concentration increases. Authors have also shown that the standard model of the critical level of concentration can be regarded as a special case of the more general model and also that the more general model attains a statistically superior fit. Empirical results appear to support the hypothesis of separate integrative and disintegrative critical levels of concentration. At the very least, they cast strong doubt on the validity of previous studies which searched for a single critical concentration ratio.
- Subjects
COST; INDUSTRIAL concentration; MARKETS; COOPERATION; ECONOMICS; PROFIT; ECONOMIC equilibrium; HYPOTHESIS
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 1, p50
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1937942