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Measuring Market Power And Cost-Efficiency Effects Of Industrial Concentration, Azzeddine Azzam
Measuring Market Power And Cost-Efficiency Effects Of Industrial Concentration, Azzeddine Azzam
Azzeddine Azzam
In this paper, the author shows how E. Appelbaum's framework for testing price-taking behavior in a single industry can be formally extended to consider concentration explicitly. In so doing, he separates the market power effect of concentration from its cost-efficiency effect. Data from the U.S. beef-packing industry are used to illustrate an empirical application of the model. The findings support oligopsonistic market power and slaughter-cost efficiency in the industry. However, the cost-efficiency effect outweighs the market-power effect.