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Abstract
A market structure‐performance model is used to search for a structural break in the leading firm market share‐profitability relationship. The model, incorporating both market power and efficiency variables to account for variations in price‐cost margins, is tested using cross‐section 1978/79 Census data for New Zealand manufacturing industries. A novel computational approach using backward and forward cusum and cusum of squared tests based on recursive residuals is used. A statistically significant breakpoint at a top firm market share of 16–17 per cent is found, with the model being much stronger for the sub‐set of data above that point.
Notes
Chief Economist, Commerce Commission, Wellington, New Zealand.
Associate Professor of Statistics, Statistics Research and Consulting Centre, Massey University, Palmerston North, New Zealand.