Market structure of China's construction industry based on the Panzar-Rosse model

Bingsheng Liu, Xueqing Wang, Yuan Chen and Yinghua Shen

Construction Management and Economics, 2013, vol. 31, issue 7, 731-745

Abstract: The structure-conduct-performance (SCP) paradigm posits that market structure determines market performance, and the generally low productivity of China's construction industry is a reflection of the irrationality of its market structure. Currently, the main approaches for measuring market structure can be classified as either structural approaches or non-structural approaches. Because the statistical data on structural approaches is one-sided, the indicators for the Panzar-Rosse model (a non-structural approach) for the construction industry can be selected by examining the Panzar-Rosse model and comparing the characteristics of the construction industry with those of the banking industry. The Panzar-Rosse model is employed to assess the market structure of 21 listed companies in China's construction industry during the period from 2009 to 2011. The analysis revealed that China's construction industry operates under conditions of monopolistic competition with free-entry equilibrium. The methods and results of the research are expected to contribute to the advancement of theories related to and methods of analysing the market structure of industries other than the banking industry.

Date: 2013
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DOI: 10.1080/01446193.2013.817679

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