Working paper Series

Benchmarking Structure-Conduct-Performance Indicators of Competitive Intensity in Canadian Industries
by Henry Thille.

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Abstract

The notion of competitive intensity is of broad interest to economists and often finds itself the subject of comparisons between different countries. Case in point, in a recent survey of Canada the OECD concluded that product market competition appeared relatively strong in Canada as compared to other OECD economies. This conclusion was drawn based on the analysis of a number of indicators of competitive intensity, some macroeconomic in nature, others drawn from industrial economics. This paper reviews the type of measures of competitive intensity used by the OECD and others used in empirical industrial economics. Although a broad characterization of stylized facts can be obtained from these measures, the paper argues that such measures are not direct measures of competitive intensity and can be misleading. The paper then discusses a recent empirical framework that pivots around the notion of 'toughness of competition' but finds little robust evidence for the OECD's claim.

Key words: competition, market structure, sunk costs