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LONG‐RUN EQUILIBRIUM IN THE EMPIRICAL STUDY OF MONOPOLY AND COMPETITION
Author(s) -
Glick MARK,
Ehrbar HANS
Publication year - 1990
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1990.tb00808.x
Subject(s) - economics , monopoly , profit rate , profit (economics) , portfolio , perfect competition , rate of profit , competition (biology) , microeconomics , financial economics , ecology , biology
A long‐run tendency of industry profit rate to converge to a single competitive level has been a fundamental tenet of the industrial organization approach to the study of competitiveness in a market economy. This paper shows that for the post World War II period a weak equalization can be econometrically identified with different reaction speeds by industry. However, persistent profit rate differences endure. Finally, a portfolio theory of risk is considered as an explanation of these differentials.