Competition and Profitability
| Authors | |
|---|---|
| Year of publication | 2010 |
| Type | Article in Proceedings |
| Conference | New Economic Challenges, 2nd International PHD Students Conference |
| MU Faculty or unit | |
| Citation | |
| Field | Economy |
| Keywords | Competition; Profitability; Price; Cost; Margin; Relative Profits; Relative Profit Differences |
| Description | In this paper, we investigate relationship between competition and profitability. We define dynamic and static competition and review economic literature about persistence and sources of profits. Moreover, we compare measures of competition based on profitability and relative profits. We argue that profitability measures are more suitable for firms with similar efficiency and for the long-run studies and inter-industry comparisons. Measures based on relative profitability, on the other hand, are likely to be more useful if efficiency of firms in the industry differs persistently. |