Market Structure, Conduct and Performance Paradigm Re-applied to the Ethiopian Cement Industry

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Addis Ababa University


This paper presents a market structure, conduct, performance (SCP) analysis of industrial economics to study the relationships that existed between market structure, conduct and performance within the Ethiopian cement industry by employing a simultaneous equations framework. Based on data gathered from twelve cement manufacturing industries for five years, the paper has developed market share, advertising and profitability equations as its three simultaneous equations and estimates the coefficients using Three Stage Least Squares (3SLS) estimation method. Though estimation of the system uses a small number of observations and lacks data on additional instrumental variables the main 3SLS results from the analysis of the system of equations are found out to be : (1) there is a positive, significant and two way causes and effects relationship between market structure (market shares) and firms’ strategic behavior (advertising intensity); (2) a similar positive and two way causes and effects relationship is found between profitability and advertising intensity; and (3) there is no any significant effect of market structure on firms profitability though the latter affects the former negatively and significantly. Key words: Cement Industry, market structure, conduct, performance.



Cement Industry, market structure, conduct, performance.