Non Price Competition and Market Structure in Sunk Cost Industries: Turkish Manufacturing Industries

Abstract

This study aims to investigate that whether Sutton's predictions for sunk cost industries are robust for Turkish manufacturing industries using a panel data set. In this respect, the bounds are estimated as stochastic frontiers, where observable industry characteristics, entry barriers and export intensity are allowed to affect the mean and variance of the deviations from the frontier. In accordance with the theory, Type 2 industries have a lower bound for concentration, which is higher than that for Type 1. Besides that, tough price competition leads to a decrease in the lower bound for concentration in both Type industries contrary to the theory. This finding shows that as price competition gets tougher, entry barriers by Type 1, Type 2A and 2R (therefore the relevant non-price competition) are substantially not important. Another finding shows that Custom Union decreases concentration in both types of industries.