A test of the quality of concentration indices


Heger, Diana ; Kraft, Kornelius


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URL: http://ub-madoc.bib.uni-mannheim.de/2107
URN: urn:nbn:de:bsz:180-madoc-21071
Document Type: Working paper
Year of publication: 2008
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L13 L25 C25 ,
Subject headings (SWD): Deutschland , Konzentration <Wirtschaft> , Rentabilität , Marktstruktur , Umfrage , Schätzung
Keywords (English): Concentration Indices , Profitability , Discrete Regression Models
Abstract: Theory predicts a positive relationship between market concentration and profitability in most scenarios. In empirical work, however, this relation is frequently not found or only a weak connection is observed. We compare the performance of concentration and market share variables, which are generated on the basis of the official industry classification, with information collected directly from firms. Information from companies on the number of competitors, their relative size and the intensity of price competition is highly significant in explaining profit levels, while none of the concentration indices performs well. Hence, the poor quality of industry data is responsible for the loose connection that is usually found between concentration and profitability.
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Heger, Diana ; Kraft, Kornelius (2008) A test of the quality of concentration indices. Open Access [Working paper]
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