Abstract:
This paper studies the effects of the structural variables of the Iranian industries sector on the welfare cost using to the Structure-Conduct-Performance (SCP) theory. In other words, we investigate the role of structural components and their effects on the size of the welfare cost in Iran's industry sector. We have used the Leibenstein's model to calculate the deadweight loss and then the panel data model has been used to quantify the model. Leibenstein believed that in many cases the monopolistic industries operate inefficiently due to being on the margin of safety. So in addition to the welfare triangle, the costs of the inefficiency of monopolistic industries should be also considered as the welfare cost. Our results demonstrate that there is a direct relationship between the welfare cost and all of the parameters of the model (barriers to entry, market concentration, economies of scale, state ownership share and firm size).
Machine summary:
The Effects of the Structural Variables of the Iranian Industries on the Social Cost: The SCP Approach Mohammad Nabi Shahiki Tash Department of Economics, University of Sistan and Baluchestan, Zahedan, Iran.
Our results demonstrate that there is a direct relationship between the welfare cost and all of the parameters of the model (barriers to entry, market concentration, economies of scale, state ownership share and firm size).
Thus, the SCP paradigm has been considered as follows: WL = f (CDR, HHI , MES, Sngov,VAR) (16) Where, WL indicates the welfare cost, CDR stands for cost disadvantage ratio (as a proxy of entry barrio intensity), HHI is the Herfindahl-Hirschman concentration index, MES is the index for optimal point of production, Sngov is the size of government in the industrial activities and VAR is the firm size in the industry.
Also, according to the industrial economics theories, it is expected that the relationship between structural variables and the welfare cost be as follow: i) Cov (HHI it ,WLit ) f 0 ii) iii) iv) v) Cov (CDRit ,WLit ) f 0 f Cov (MESit ,WLit ) 0 p f Cov (Sngovit ,WLit ) 0 p f Cov (VARit ,WLit ) 0 p (18) We will continue with the manner of measuring each index in Iran's industry sector.
The results of this research indicate that there is a positive relationship between the intensity of entry barrier and the ratio of welfare cost to sales in Iran's industries.