Exam Prep Flashcards
Empirical Research (33 cards)
Tested if high industry concentration leads to monopolistic pricing; found high concentration correlates with higher profits, supporting SCP framework.
Bain (1951)
Found profits in concentrated industries came from lower costs, not higher prices, suggesting efficiency rather than market power explained profitability.
Peltzman (1977)
Showed vertical integration in gasoline retail raised competitor prices, suggesting it can reduce competition.
Hastings (2004)
A la carte cable pricing has mixed welfare effects; bundling exploits consumer heterogeneity and fixed costs.
Crawford & Yurukoglu (2012)
Introduced bounds approach showing that in industries with endogenous sunk costs, market concentration doesn’t fall with market size.
Sutton (1991)
Found competition intensifies most with entry of second and third firms; additional entrants have diminishing effect—finiteness property.
Bresnahan & Reiss (1991)
Banks in concentrated markets had lower cost efficiency, confirming that market power can lead to productive inefficiency.
Berger & Hannan (1998)
Price-cap regulation in telecoms drove more innovation and efficiency than rate-of-return regulation.
Sappington (2002)
Privatization and price-cap regulation in UK electricity reduced costs and improved welfare.
Newbery & Pollitt (1997)
Found UK industry concentration correlated with higher profitability, reinforcing SCP framework.
Cowling & Waterson (1976)
Incentive-based regulation in electricity improved cost efficiency and performance.
Joskow (2008)
Vertical integration in UK gasoline reduced double marginalization but had ambiguous effects on overall competition.
Slade (1998)
UK manufacturing industries; used a natural experiment from cartel abolition in the 1950s. Found that increased price competition led to higher concentration due to market shakeout, especially in endogenous sunk cost industries.
Symeonidis (2000)
Shift in UK price fixing laws. Abolishment of price fixing led to price decreases, pushing out inefficient firms leading to higher concentration at lower prices
Symeonidis (2002)
Food & drink industries in 6 countries; compared exogenous vs. advertising-intensive industries. Found lower bound to concentration in advertising-intensive sectors, supporting the bounds approach.
Sutton (1991)
US industries with different R&D intensities. Found that in high-R&D sectors, more submarkets led to lower concentration. No such effect in low-R&D industries.
Sutton (1996)
UK and US firm-level data. Found low patent use among innovators (~4–5.5%). Firms prefer informal protection methods (e.g., secrecy, lead time). Patents less important except in specific sectors.
Hall et al. (2013)
Case study of GM–Fisher merger and petroleum pipelines. Found vertical integration emerged in response to asset specificity and risk of opportunism.
Klein, Crawford & Alchian (1978)
US car manufacturers; econometric analysis of 127 components. Found firm-specific and costly components more likely to be made in-house, supporting transaction cost theory.
Monteverde & Teece (1982)
US energy sector; showed that asset specificity correlates with longer-term contracts, as firms substitute contract governance for vertical integration.
Joskow (1987)
UK firms; found that product market competition, high debt, and active shareholders all correlate with higher productivity growth.
Nickell (1996)
Extension of earlier study with broader firm sample. Reconfirmed that external pressures (market and financial) enhance performance.
Nickell et al. (1996)
UK industry data; showed that cartels reduce productivity. Supports case for antitrust interventions to maintain efficiency.
Symeonidis (2008)
Literature review; found that entry barriers and internal organisation are key to cartel stability. Cheating less often the core issue.
Levenstein & Suslow (2006)
