Abstract

In this paper, changes in market concentration are modelled in terms of long-run steady-state levels, and the adjustment towards them. Both the speed of adjustment and the long-run levels of concentration are allowed to vary across industries. Non-linear three-stage least squares estimates for allowing for the endogeneity of profits and advertising for 184 U.S. industries, 1963–1967, suggest that both the speed of adjustment and the levels of concentration in the long run are largely determined by minimum efficient scale.

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