248 WILLIAM G. SHEPHERD correlated with the ﬁrms’ rates of proﬁtability on capital. The slope coefﬁcients were about 0.2, and the t -ratios were often over 5 or 6, indicating strong statistical signiﬁcance. These market-share correlations superseded the concentration-price research by offering more precision of concept as well as of data. They focused the econometric analysis down more closely onto each ﬁrms’ speciﬁc market positions and motiva- tions: that is, onto the things that ﬁrms care most directly about – their own market positions and their own proﬁts. That focus ﬁts also the rising interest in the 1980s about dominant ﬁrms (as in Hay and Vickers, 1987). The market-share focus contrasted with the vague oligopoly-based hypotheses about joint-maximizing, entry-limited prices, and industry-wide price-cost ratios. But even when the structure-proﬁt patterns were clear and strong, they could be re-interpreted in an upbeat way which took market power out of the picture. Chicago School members argued that all the structural ﬁndings – both the concen- tration-to-price and the market-share-to-proﬁt-rate correlations – might merely re- ﬂect superior performance. Or rather, they said, good performance really was the real cause, in nearly all cases – or actually in all of them. Hence the
Review of Industrial Organization – Springer Journals
Published: Oct 16, 2004
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