Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK

This paper examines the impact of firms’ conduct on market structure. It studies the evolution of concentration in UK manufacturing following the abolition of cartels using a theoretical framework based on Sutton’s theory of market structure and a panel data set of four‐digit industries over 1958–1977. The econometric results suggest that the intensity of price competition has a positive effect on concentration in exogenous sunk cost industries as well as in advertising‐intensive and R&D‐intensive industries. The concentration‐market size relationship, while negative in exogenous sunk cost industries, breaks down in industries with high advertising or R&D intensity.