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Cartel policy, non-price competition and market structure: theory and evidence from the UK

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This paper examines the impact of price competition on advertising/R&D expenditure and market structure. General theoretical results are derived which restrict the space of possible outcomes regarding the behaviour of concentration and advertising/R&D expenditure following an intensification of price competition. The theoretical predictions are tested using UK data on the evolution of competition, concentration and advertising over 1954-1977. The econometric results suggest that the introduction of restrictive practices legislation in the UK cause a rise in concentration in previously cartelised high-advertising manufacturing industries and probably also a fall in advertising intensity.

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en

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http://eprints.lse.ac.uk/6758/

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