Vertical integration and market power

Maddigan, R. J.

Title: Vertical integration and market power

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Abstract

One of the continuing debates of industrial organization surrounds the importance of market structure in determining a firm's performance. This controversy develops naturally from the difficulties in measuring the relevant variables and the hazards of statistical analysis. The focus of this empirical study is the relationship between vertical integration, as an element of market structure, and market power, as a component of a firm's performance. The model presented in this paper differs from previous efforts because vertical integration is measured by the Vertical Industry Connections (VIC) index. VIC is defined as a function of the relative net interactions among the industries in which a firm operates, and is calculated by use of the national input-output tables. A linear regression model is estimated by means of a random sample of firms selected from the Standard and Poor's COMPUSTAT data base for 1963, 1967, and 1972. Combined cross-sectional, time-series methods are employed. The dependent variable is the price-cost margin; the independent variables include not only VIC, but also the concentration ratio, diversification index, value of assets, capital-output ratio, and sales growth. The results indicate that VIC is significant in increasing the price-cost margin, and thus support the hypothesis that vertical integration ismore »« less

Authors:: Maddigan, R. J.

Publication Date:: Tue Jan 01 00:00:00 EST 1980

Research Org.:: Oak Ridge National Lab., TN (USA)

OSTI Identifier:: 6974602

Report Number(s):: CONF-800820-12

DOE Contract Number:: W-7405-ENG-26

Resource Type:: Conference

Resource Relation:: Conference: American Statistical Society meeting, Houston, TX, USA, 11 Aug 1980

Country of Publication:: United States

Language:: English

Subject:: 29 ENERGY PLANNING, POLICY AND ECONOMY; INDUSTRY; ORGANIZATIONAL MODELS; PERFORMANCE; VERTICAL INTEGRATION; COST; INPUT-OUTPUT ANALYSIS; MARKET; PRICES; REGRESSION ANALYSIS; TIME-SERIES ANALYSIS; ECONOMIC ANALYSIS; ECONOMICS; MATHEMATICS; STATISTICS; 290100* - Energy Planning & Policy- Energy Analysis & Modeling

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                    Maddigan, R. J. Vertical integration and market power.  United States: N. p., 1980. 
        Web.

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                    Maddigan, R. J. Vertical integration and market power.  United States.

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                    Maddigan, R. J. 1980.  
        "Vertical integration and market power".  United States.  https://www.osti.gov/servlets/purl/6974602.

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@article{osti_6974602,

  title        = {Vertical integration and market power},

  author       = {Maddigan, R. J.},

  abstractNote = {One of the continuing debates of industrial organization surrounds the importance of market structure in determining a firm's performance. This controversy develops naturally from the difficulties in measuring the relevant variables and the hazards of statistical analysis. The focus of this empirical study is the relationship between vertical integration, as an element of market structure, and market power, as a component of a firm's performance. The model presented in this paper differs from previous efforts because vertical integration is measured by the Vertical Industry Connections (VIC) index. VIC is defined as a function of the relative net interactions among the industries in which a firm operates, and is calculated by use of the national input-output tables. A linear regression model is estimated by means of a random sample of firms selected from the Standard and Poor's COMPUSTAT data base for 1963, 1967, and 1972. Combined cross-sectional, time-series methods are employed. The dependent variable is the price-cost margin; the independent variables include not only VIC, but also the concentration ratio, diversification index, value of assets, capital-output ratio, and sales growth. The results indicate that VIC is significant in increasing the price-cost margin, and thus support the hypothesis that vertical integration is a strategy to enhance market power. 1 figure, 3 tables.},

  doi          = {},

  url          = {https://www.osti.gov/biblio/6974602},
  journal      = {},
number       = ,

  volume       = ,

  place        = {United States},

  year         = {Tue Jan 01 00:00:00 EST 1980},

  month        = {Tue Jan 01 00:00:00 EST 1980}

}

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