9780262194686

Effects of Competition : Cartel Policy and the Evolution of Strategy and Structure in British Industry

by
  • ISBN13:

    9780262194686

  • ISBN10:

    0262194686

  • Format: Hardcover
  • Copyright: 2002-02-01
  • Publisher: Mit Pr
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Summary

Policies to promote competition are high on the political agenda worldwide. But in a constantly changing marketplace, the effects of more intense competition on firm conduct, market structure, and industry performance are often hard to distinguish. This study combines game-theoretic models with empirical evidence from a "natural experiment" of policy reform. The introduction in the United Kingdom of the 1956 Restrictive Trade Practices Act led to the registration and subsequent abolition of explicit restrictive agreements between firms and the intensification of price competition across a range of manufacturing industries. An equally large number of industries were not affected by the legislation. Using data from before and after the 1956 act, this book compares the two groups of industries to determine the effect of price competition on concentration, firm and plant numbers, profitability, advertising intensity, and innovation. The book avoids two problems common to empirical studies of competition: how to measure the intensity of competition and how to unravel the links between competition and other variables. Because the change in the intensity of competition had an external cause, there is no need to measure the intensity of competition directly, and it is possible to identify one-way causal effects when estimating the impact of competition. The book also examines issues such as the industries in which collusion is more likely to occur; the effect of cartels and cartel laws on market structure and profitability; the links between competition, advertising, and innovation; and the constraints on the exercise of merger and antitrust policies.

Table of Contents

Acknowledgments ix
An Introductory Overview
1(20)
A Natural Experiment
1(2)
Key Theoretical Concepts
3(4)
Empirical Methodology
7(5)
Outline of the Book
12(6)
Policy Implications
18(3)
Cartel Policy and the Evolution of Competition in British Industry
21(24)
Introduction
21(1)
The Origins of British Cartel Policy
22(1)
The 1956 Act
23(10)
Restrictive Practices in the 1950s
33(7)
The Impact of the 1956 Legislation on Firm Conduct
40(3)
Concluding Remarks
43(2)
The Competition Data
45(42)
Introduction
45(1)
Data Sources on Competition in British Industry
46(10)
The Construction of the Data Set
56(15)
The Determinants of Collusion
71(12)
Concluding Remarks
83(4)
Price Competition and the Evolution of Concentration in Exogenous Sunk Cost Industries
87(62)
Introduction
87(4)
Theoretical Framework
91(9)
A Specific Example: The Linear Demand Model
100(4)
The Data
104(20)
Empirical Model and Results
124(15)
Concluding Remarks
139(10)
Price Competition, Advertising, and Market Structure in Advertising-Intensive Industries
149(74)
Introduction
149(2)
Theoretical Framework
151(13)
A Specific Example: The Linear Demand Model with Quality
164(8)
The Data
172(6)
Econometric Models and Results
178(33)
Two Case Studies
211(10)
Concluding Remarks
221(2)
Price Competition, Innovation, and Market Structure in R&D-Intensive Industries
223(54)
Introduction
223(6)
Theoretical Framework
229(9)
The Data
238(12)
Empirical Models and Results
250(24)
Concluding Remarks
274(3)
Price Competition and Profitability: Are Cartel Laws Bad for Business?
277(50)
Introduction
277(2)
Theoretical Issues
279(6)
Case-Study Evidence
285(9)
The Data
294(8)
Empirical Models and Results
302(21)
Concluding Remarks
323(4)
Epilogue 327(6)
Appendix A: A Survey of Collusive Agreements in British Manufacturing Industries 333(82)
Appendix B: Data Sets 415(94)
Table B1: Data set for chapter 4
416(16)
Table B2: Data set for the concentration regressions of chapter 5
432(9)
Table B3: Data set for the advertising regressions of chapter 5
441(14)
Table B4: Data set for the innovation regressions of chapter 6
455(10)
Table B5: Data set for the concentration regressions of chapter 6
465(9)
Table B6: Data set for chapter 7
474(35)
Glossary of British Terms 509(2)
References 511(12)
Index 523

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