What Creates Abnormal Profits: Collusion, Efficiency or Strategy?
Griffiths, W., Jensen, P. and Webster, E. (2011) What Creates Abnormal Profits? Scottish Journal of Political Economy, 58(3) 323-346
32 Pages Posted: 18 Nov 2021
Date Written: October 29, 2021
Abstract
The debate regarding the determinants of persistent abnormal profits is re-examined using a new approach to the measurement of profits which explicitly accounts for intangible capital. Abnormal profits are estimated using data on tangible and intangible capital for 2800 Australian firms over a 18-year period. The determinants of abnormal profits are then estimated using variables collated from separate accounting and administrative company records data as well as an in-house survey of innovation and management practices. Our results imply that firm-specific factors relating to efficiency and strategy are much larger than the industry-specific effects of collusion
Keywords: Monopoly profits; abnormal profits, collusion, competition, efficiency
JEL Classification: O30; O34
Suggested Citation: Suggested Citation