A Dynamic Modeling of Cooperation and Validation of Collusion and Efficient Structure Theories in Iran’s Chemical Production Industry

The main purposes of this study are measuring the degree of firm’s collusion and cooperation in the chemical industry. Moreover, dynamic effects of collusion and concentration in the profitability investigated to identify the role of collusion and efficient structure theories in this industry. To meet this end, the data of nine sub-sectors of Iran’s chemical industries in the 4-digit level have been used over the period of 1996-2014. In this research, the system generalized method of moments was used to analyze the degree of collusion and its interactions with profitability. Results indicate that firms cooperate with each other about the price and quantity of sale. Also, in this industry with increasing concentration in addition to increasing collusion the nonlinear relation between concentration and collusion confirmed. On the other hand, although the results confirmed positive effects of collusion, concentration and cost efficiency in profitability but concentration and collusion had a more prominent role. Also, the results of the Dumitrescu & Hurlin Granger causality test showed that in the chemical industry, the market structure (concentration) and collusion, as well as cost efficiency, were affected performance (profitability). So in this industry both collusion and the efficiency structure hypothesis verified.