Administrative Control, Buyer Concentration, and Price-Cost Margins

Craig M Newmark

The Review of Economics and Statistics, 1989, vol. 71, issue 1, 74-79

Abstract: Steven H. Lustgarten (1975) and others have presented evidence that concentrated buyers lower the price-cost margins of sellers, but theory predicts that buyer concentration is positively correlated with administrative control of transactions. This paper shows that administrative control is responsible for the observed effect of buyer concentration. When a proxy for administrative control is included in Lustgarten's model, buyer concentration becomes insignificant. Copyright 1989 by MIT Press.

Date: 1989
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