New products and market competition

Kostas Axarloglou

International Advances in Economic Research, 2004, vol. 10, issue 3, 226-234

Abstract: Using a novel data set on new product introductions in U.S. manufacturing, the paper studies the relationship between new product introductions and the intensity of market competition as it is measured by industry-specific price-cost margins. New product introductions intensify market competition and depress price-cost margins. These results draw significant empirical support from a sample of five U.S. manufacturing industries. A 10 percent increase in the number of new product introductions causes price-cost margins to drop by approximately 0.5 percent. Although price-cost margins appear procyclical with respect to fluctuations in industry sales, new products make price-cost margins less procyclical and therefore, the intensity of market competition more procyclical. Copyright International Atlantic Economic Society 2004

Date: 2004
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DOI: 10.1007/BF02296217

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