Abstract

This paper uses firm level data to examine the market power versus efficiency hypothesis by taking into consideration both the long run behavior of profitability and the possible endogeneity has among profitability market there, and advertising variables. In a sample of 5 dairy processing industries in Pakistan in the period of 2005to 2010 (July), two stage least squares results show both a direct effect of firm characteristics and an indirect effect of industry characteristics on profitability which do not provide support for the efficiency hypothesis alone but they do not show that profitability is affected by both firm and industry level.

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