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Indicators and causes of size advantages in industry
Author(s) -
Hirschey Mark,
Wichern Dean W.
Publication year - 1983
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090040203
Subject(s) - imperfect , causation , econometrics , point (geometry) , economics , variable (mathematics) , industrial organization , microeconomics , mathematics , mathematical analysis , philosophy , linguistics , geometry , political science , law
Relationships among indicators and causes of size advantages in industry are analysed here using Jöreskog and Goldberger's multiple indicator and multiple cause model. This approach is thought to be particularly appropriate for the study of size advantages in industry since only imperfect indicators of this important economic variable are typically available. An important objective of the analysis is to learn whether or not size advantages tend to be more effectively exploited in instances of high concentration. Estimation results suggest that this is indeed the case, and imply a direction of causation from concentration to realized size advantages much as earlier studies have found that concentration causes reductions in production costs and suboptimal capacity. This finding is important from a theoretical point of view since it suggests that further studies on the subject should consider the possibility that the degree to which size advantages in industry are exploited is endogenously determined. In addition, these findings imply that antitrust policies intending to reduce the relative sizes of leading firms must be sensitive to the potential for at least some losses in operating efficiency.