Concentration and Price-Cost Margins in Manufacturing Industries

Authors Collins and Preston, who have collaborated on earlier studies of industrial organization and marketing, are here concerned with the relationship between business concentration and profitability in American manufacturing industries. Economic theory states that prices are higher and price-cost margins wider under conditions of monopoly than under those of competition. the problem in applying this theoretical conclusion to empirical analysis and economic policy is that a gap exists between the theoretical concept of monopoly on the one hand and the measurement of concentration on the other. A number of earlier studies have analyzed samples of available data to relate measured concentration to profitability. the present study reviews these previous efforts and provides a common basis for comparison of them. It then analyzes statistical data for the year 1958 in order to obtain an extensive new collection of empirical results. This analysis focuses specifically on the inter-industry variability of price-cost margins, and seeks to explain this variability in terms of differences in concentration and other variables. This title is part of UC Press’s Voices Revived program, which commemorates University of California Press’s mission to seek out and cultivate the brightest minds and give them voice, reach, and impact. Drawing on a backlist dating to 1893, Voices Revived makes high-quality, peer-reviewed scholarship accessible once again using print-on-demand technology. This title was originally published in 1968.

At the time of original publication, Norman R. Collins was Professor of Agricultural Economics and Business Administration and Lee E. Preston was Professor of Business Administration both at the University of California, Berkeley.