Market Structure and Social Costs in Cement Industry: The Case study of Iran
Subject Areas : Applied Economics
سید شمس الدین
حسینی
1
(ندارد)
سمیه
دودانگه
2
(مسئول مکاتبات)
Keywords: Competition, Market structure, concentration, Herfindhal-Hirshman index, Market performance, Social Cost of Cement Monopoly, Iran, Integral data Pattern,
Abstract :
This paper aims to highlight the structure of cement market in Iran and show how it has performed in the past, particularly over period of 2000 - 2007. Following the new policy guidelines notified by the supreme leader of Iran, I republic, pertaining the article 44 of The Constitution, it deemed necessary to carry out studies evaluating the viability these corporation exposed to market forces. The rationale behind this new policy was to expedite the divestment process of state owned corporations to private entities as a step to enhance an environment of competitiveness in the economy, and also to promote productivity , social welfare and so forth, As such, this study aims to fill this gap. To delineate the structure of Cement market, techniques such as Concentration index, Hirfindal-Hirshman index, and Entropy (both cases of including not including ownership effect) indexes are used. In the case Entropy including ownership effect, the result shows that over the period under study, the concentration ratio of top four firms were between 74 and 84 percent, and that of Herfindhal-Hirshman index was between 2018 and 2501 unit and Entropy index was between 0.74 and 0.83. In the case Entropy excluding ownership effect, the above observation can not be maintained. To measure social cost inflicted by Cement Industry Activities, Cowling-Mueller Method, was used. Cost function for cement industry (comprising of 10 firms) was estimated in an Integral Data Pattern Format using data covering the period of 2000 to 2007. Then, based on the information, the total cost of above mentioned firms, their price deviation from total cost, and the total welfare costs of the industry as a whole were calculated. The results of above calculations show that the welfare loss resulted from monopoly of these 10 firms, amounts to 44 percent of sale value. Moreover, economics of scale was taken care of while estimating marginal cost and average cost in this industry.
