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- Title
MULTIMARKET CONTACT AND ECONOMIC PERFORMANCE.
- Authors
Scott, John T.
- Abstract
In any economy, the growth depends on the free flow of resources from one industry to another in response to changing demands and costs. While diversified companies may have advantages that would facilitate the movement of capital, they have enhanced opportunity for coordination if they meet in several markets. Multimarket grouping of sellers could reduce the flow of resources, thereby inhibiting a socially desirable competitive process, if it proceeded until mutual dependence among diversified sellers was recognized and reduction in competition coordinated, tacitly or otherwise. The author remarks that profits are lower for lines of business where multimarket contact is high but seller concentration is low, but higher when both contact and concentration are high than when concentration alone is high. If resources flow from declining to expanding industries, the result is elimination of profit in industries that expand. In such an economy, one would predict that response to demand shocks or cost shocks would differ significantly from that in a competitive economy. Here the author suggests a new method of assesing multimarket contact.
- Subjects
ECONOMICS; RESOURCE allocation; BUSINESS enterprises; INDUSTRIAL relations; CORPORATE growth; COMPETITION; INDUSTRIAL organization (Economic theory); ECONOMIC development
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p368
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925934