Competition and Profitability

Authors

KRČÁL Ondřej

Year of publication 2010
Type Article in Proceedings
Conference New Economic Challenges, 2nd International PHD Students Conference
MU Faculty or unit

Faculty of Economics and Administration

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.

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