Publisher Summary This chapter discusses the cost concepts required for analyzing the role of technology in the determination of firm and industry structure. It focuses on the general multiproduct case, although important single product aspects of the problem are also discussed. An analysis of the role these cost concepts play in determining efficient industry structure is presented in the chapter. The most basic concept with which to characterize the productive technology available to the firm is the technology set, a list of the combinations of inputs and outputs that are available to the firm. In a private enterprise economy, any industry structure that persists in the long run must yield the firms in the industry at least zero economic profits. This places certain restrictions on the relative locations of the cost and demand curves. In an empirical application that attempts to estimate the cost function of an individual firm, the data available may be better suited for estimating a short-run cost function: a specification that assumes that only some of the inputs available to the firm are set at their cost-minimizing levels.

Chapter 1 Technological determinants of firm and industry structure

Technological determinants of firm and industry structure

In the spirit of Fisher and Lorie (1968), the authors constructed a data base comprising monthly rates of return on 1029 separately-listed Sydney mining equities over the period January 1958 to February 1979. The data base should stimulate further research. The first use of the data is a study by the authors of historical risks and returns from equity investments in Australian mining. The value-weighted average return over the period was found to be 11.9% per year, continuously-compounded. Mining equities were considerably riskier (considered by themselves) than industrial equities and a surprisingly large amount of their risk did not appear to be diversifiable. There was little correlation between size (measured by market capitalization) and subsequent rate of return, though size and standard deviation of rate of return were significantly negatively correlated. The seemingly unfavourable risk/return comparison for mining is anomalous and requires further investigation.

Risk and Return from Equity Investments in the Australian Mining Industry: January 1958 — February 1979

Some aspects of statistical inference in the linear regression model

This paper reports the results of simulation tests on various models that have been employed by researchers in testing the share market response to information releases. The study employs methodolo...

Measuring Abnormal Performance on the Australian Securities Market

The empirical frequency distributions of continuously-compounded monthly share returns on the Melbourne Stock Exchange over 1958-73 are studied for individual securities and portfolios. The typical...

The Distribution of Stock Market Returns: 1958-1973

This paper finds very strong evidence of economies of scale for a sample of 143 private sector companies from the 1979–80 Insurance Commissioner's Report.

Peter Praetz

Papers

The Distribution of Stock Market Returns: 1958-1973

Economies of Scale in the Australian General Insurance Industry