The Effect of Market Growth and Contraction on Industry Price-Cost Margins

John Kwoka
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John Kwoka: George Washington University

Eastern Economic Journal, 1990, vol. 16, issue 3, 221-227

Abstract: Economic theory predicts that market growth or contraction may affect the role of industry concentration upon price-cost margins. Existing empirical work, however, has not specified the relationship completely or correctly. This article sets out a model consistent with theory and then tests several hypotheses on manufacturing industry data. It finds that the effect of concentration on industry pricing behavior declines when the overall market either grows or contracts sharply, and declines when the industry is highly capital-intensive. The effect of concentration, however, persists for the vast majority of cases.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:16:y:1990:i:3:p:221-227

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