The Influence of Increased Foreign Competition on Profitability and Concentration in the Taiwan Petrochemistry Industry(In Chinese. With English summary.).

Abstract

Based on 1987-91 data of Taiwan`s midstream petrochemical industries, and applying the full information maximum likelihood method to a simultaneous equations model of domestic PCM, import ratio and domestic concentration derived from an oligopoly model in a small open economy, this paper finds that domestic PCM is directly and significantly related to domestic concentration and the growth rate of domestic sales. Domestic PCM tariffs and transportation costs affect the import ratio adversely at the 1% level of significance, while the latter is positively and significantly correlated with the import ratio and the degree of capacity utilization. Furthermore, domestic concentration has a negative and nonlinear relationship to market size. Finally, there exist direct simultaneous relationships between domestic concentration and domestic PCM or import ratio.