Price Dynamics and Competition in Ethiopian Manufacturing Industries

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title




This paper explores the effect of market structure on pnce dynamics in 47 (ISIC-4) Ethiopian industries. A number of researches, notwithstanding the theoretical ambiguity, tend to confirm that the speed at which industry prices adjust to market fluctuations is a negative function of the degree of industrial concentration. That is industries in a more competitive market are expected to instantly respond to cost and demand shocks, whilst those industries in a concentrated market structure are assumed to adopt price smoothing strategies which manifests in less frequent price adjustments. The purpose of this paper is to provide evidence on the much implied systematic variation in price adjustment associated with difference in the degree of market competitiveness. The partial adjustment model, following Encoua and Geroskie (I986), is used to analyze how industry prices react to cost and demand shocks. The empirical results seems to indicate that (I) sluggish price adjustment only prevail in moderately competitive industries; (2) Prices in all groups appeared to be more sensitive to cost shocks but virtually not at all to demand shocks.



Dynamics, Manufacturing