Modeling industry structure and economic performance

This paper presents a simultaneous equations model of profitability, concentration, advertising expenditures and research and development outlays. The data are subjected to regression diagnostics in an effort to ascertain the importance to the estimation results of a subset of the data that can have a disproportionate influence. The estimation results, especially for the advertising expenditures relationship and the research and development outlays equation, do change when a truncated data sample (based on the omission of the outliers) is used. This serves partially to explain why there is some disagreement in the literature on market structure and economic performance.