Structure and Behavior in British Industries, with U.S. Comparisons

Abstract

THE basic questions about market structure concern what it is, what determines it, and what effects it has. Conceptual and econometric answers to the questions are still formative, even after three decades of research [2, IO, I8, 25, 29, 40]. Few hypotheses have acquired firm empirical support, and structure-performance relations in large areas of market activity remain conjectural. British industry is relatively unexplored, even after several pioneering efforts. Its patterns are of concern both for domestic industrial performance and as tests of hypotheses which are of more general interest and importance. This paper touches on both contexts. It first derives measures of British industrial market structure in recent years and uses them to indicate the extent of structural monopoly during 1958-63, in Section i. It next uses these measures in Section 2 to test hypotheses about comparative British and U.S. concentration. Section 3 then offers partial tests of two basic hypotheses about the determinants and effects of market structure: that growth erodes concentration over time, and that the degree of structural monopoly affects pricecost behavior. The findings conflict with several accepted conclusions and confirm several others, even though the data are imperfect and the period is brief and possibly atypical. Section 4 summarizes the findings.