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UBC Theses and Dissertations

Study of the relationship between profit rates and economic concentration in a sample of Canadian industry Smith, Milo Alastair

Abstract

The purpose of this thesis is to test the hypothesis, derived from neo-classical micro-economic theory, that other things being equal the more concentrated an industry becomes, the more likely it is that firms in that industry can pursue monopolistic practices and thereby earn greater profits than would otherwise be possible if there were more firms in that industry. The method of study employed is the application of regression and correlation analysis to a cross-sectional sample of Canadian industry. The results of this study lead one to the conclusion that concentration and profits are positively correlated, thus supporting the hypothesis. However, concentration explains only about 10 per cent of the variation in industry profit rates in the cross-section.

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