Analysis Of Market Structure And Firm Performance

The paper reviewed research literatures of market classification, concentration ratios of thebasic theories, analyzed the causes of market barriers that formed concentration ratio, analyzedmarket prices, performance of enterprises, and made some simulations of technological progressaccording to market share. Market concentration ratios, total factor productivity change, the unitoutput profit margins, loss of social welfare was measured based on related theories, and whetherthere is a Pairwise Granger causative relationship between the factors was analysed.Conclusions by theoretical model analysis showed that prices in competitive market arehigher than monopoly market generally, the output are more, and technology progresses morequickly, and social welfare loss is less. Technical progress model is constructed to analyse thedynamic mechanism of competition promoting the technical progress.the influence of marketshare on the probability of technical progress is simulated according to the requirement oftechnology for market share, the simulation demonstrated that:(1) if current technologyefficiency is at a high level, the probability of technology progress is hihger, if currenttechnology efficiency at a low level, the probability of technology progress lower;(2) therequirement of technology for market share has great influence on the probability of technologyprogress, if technology has a positive linear relation with market share, the the probability oftechnology progress will have a positive linear relation with market share too, if technology hasa negative linear relation with market share, the the probability of technology progress will havea negative linear relation with market share, if technology has no relation with market share, theprobability of technology progress will have no relation with market share;(3) if the interest ratesgo up, the probability of technology progress will decrease when the market share andtechnology remain constant, if the interest rates go down, the probability of technology progresswill increase.Market is segmented into small pieces by administrative monopoly in China, and theconcentration ratio of CR4and CR8is usually small, the concentration ratios are not effectiveways to measure the market monopoly, so we take the consistency of unit output profit marginsand productivity change as another way to judge whether there is monopoly power in an industry.If the unit output profit margin is higher as well as the productivity change, we don’t treat theindustry as a monopoly industry. If the unit output profit margin is higher, but the productivitychange is lower, we treat the industry as a monopoly industry.The empirical analysis of total factor productivity of the seven industries of oil, furnituteand so on demonstrates that:(1) there is a negative Pairwise Granger causative relation between concentration ratios and total factor productivity changes, that is to say the total productivity willdecrease with the increase of market concentration ratios;(2) the analysis of enterprises’ quantityand total factor productivity change of different type of enterprises indicates that only thefurniture industry have a Pairwise Granger causative relation, and the other five industries don’thave such a relation, in the meanwhile, the unit output profit margins of furniture industry islower, we take the furniture industry as a perfect competitive industry;(3) the concentration ratioof the oil and power industry is higher, their total factor productivity changes are negative, butboth of them have extremely higher unit output profit margins than the other five industries,sowe take the oil and power industry as monopoly market, this conclusion is consistent withjudgements of other economists;(4) textiles, metals, electronics, and coking industries are morelikely to be competitive industries.The analisis of social welfare loss of the seven industries demonstrate that: the socialwelfare loss by the way of return on net assets is bigger than that of net profit rate of fixed assets,the social welfare loss by the way of Cowling and Mueller is bigger than that of Harberger, thesocial welfare loss of oil industry is the biggest, the textile industry is the smallest, power, metal,electronics industries are in the middle position, textiles and coking industries are smaller. Theratio of loss against industry output in the oil industry is the biggest, and power industry is thesecond, both of them are bigger than1--the power industry is in the first place,and the oilindustry the second by the way of return on net assets and Cowling and Mueller method,the otherfive industries are all smaller than1, the texeile industry is the smallest--the coking industry isthe smallest by way of net profit rate of fixed assets and Harberger method, and the textileindustry is the second. If there is a higher monopoly power in an industry, and social welfare lossis larger too, this conclusion is consistent with the model theory.