TY  - JOUR
AU  - Hall,Robert E.
TI  - Chronic Excess Capacity in U.S. Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1973
PY  - 1986
Y2  - July 1986
UR  - http://www.nber.org/papers/w1973
L1  - http://www.nber.org/papers/w1973.pdf
N1  - Author contact info:
Robert E. Hall
Hoover Institution
Stanford University
Stanford, CA  94305-6010
Tel: 650/723-2215
E-Mail: rehall@gmail.com
AB  - Previous research has suggested that firms in a number of industries
have considerable market power, in the sense that their prices exceed
their marginal costs. However, the observed profits of those industries
are not nearly as high as would occur under full exploitation of the market
power with a constant returns technology. Rather, because of fixed costs
associated with a minirnumn scale of operation or for other reasons,
industry equilibriumn occurs at a point where no abnormal returns are
earned, even though market power exists. This inference is supported by
an empirical study that shows that most industries hold capital far beyond
the point that would minimize cost given their actual output. In this
sense, the industries have chronic excess capacity.
ER  -