Industrial Structure, Concentration and the Speed of Price Adjustment

Scale economies with regard to price adjustment costs and the speed of price adjustment in Australian manufacturing

“…*indicates significant at the 5% level for a two-tailed t test. Table 2 presents the results for (10) when the coefficient estimates for the speed of price adjustment are constrained to be the same across industries and the other coefficients from (8) CR4 is negative and significant at the 1% level, which conforms to the findings in Dixon (1983), Bedrossian andMoschos (1988), Weiss (1993) and Shaanan and Feinberg (1995). It suggests that firms in concentrated industries are in a better position to take price adjustment costs into account by slowing their speed of price adjustment.…”

“…This proposition has some support in the empirical literature, as there are a number of studies that use industry concentration as a proxy for market power and find a negative relationship with the speed of price adjustment (for example, Dixon (1983), Bedrossian and Moschos (1988), Weiss (1993) and Shaanan and Feinberg (1995) for Australian, Greek, Austrian and U.S. manufacturing, respectively). Finally, averaging across the industry transforms the model into an error correction form, which places fewer restrictions on the short-run dynamics of the estimating equation when compared to a partial adjustment model.…”

Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets

“…More generally, the effect of market power on price adjustment rates is sensitive to demand structure, functional-form assumptions on adjustment costs, and the way competition is modelled. (See, for example, Worthington (1989), Ginsburgh and Michel (1988), and Bedrossian and Moschos (1988). ) 13 While adjustment cost theory does not provide much guidance on the direction of the relationship, it does suggest that market power could affect adjustment rates.…”

Price inertia and market structure: empirical evidence from Austrian manufacturing

“…Means observed that the demand shock of the Great Depression in the early 1930s caused the prices of agricultural products to fall substantially (63%) whereas those of agricultural implements only decreased moderately (6%).' This observation directed researchers' attention to the association between industrial market structure and the speed at which prices adjust to exogenous change^.^ Numerous investigations on the administered price thesis have been put forward in recent years (Domberger, 1979;Dixon, 1983;Chappell and Addison, 1983;Richards, 1985;Bedrossian and Moschos, 1988;Arz, 1989;Garman and Richards, 1991). However, summarizing the state of knowledge 'is risky, for virtually every conclusion has been contradicted somewhere' (Scherer, 1980, p. 355).…”