An Investigation on the Effects of Advertising and Industrial Concentration on Profitability in Iranian Food Products and Beverages

This study examines the effect of market structure and conduct on profitability in Iranian food products and beverages industries at 4 digit ISIC Codes in 2007. Simultaneous equations method is used for estimation. The trend of indices for market structural, conduct and performance indicate the fact that competitive environment has improved and the average rate of profitability has decreased. The study confirms the validity of Structure Conduct Performance (SCP) approach in the selected industries. The results showed that industrial concentration and advertising have a significant effect on profitability. The results also indicate a significant and positive effect of export on the average of profitability in the industry. The study demonstrated the fact that any policy for improvement of market structure including policies for decreasing entry barriers and concentration can affect conduct and performance in the industry. These policies can improve competitive environment and lead the market to allocative efficiency. It eventually enhances consumer surplus in the industry.