Can Imports Discipline Collusive Firms? Case of the Philippine Cement Industry

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1 Phlppne Insttute for Development Studes Suran sa mga Pag-aaral Pangkaunlaran ng Plpnas Can Imports Dscplne Collusve rms? Case of the Phlppne Cement Industry Rafaelta M. Aldaba DISCUSSION PAPER SERIES NO The PIDS Dscusson Paper Seres consttutes studes that are prelmnary and subject to further revsons. They are beng crculated n a lmted number of copes only for purposes of solctng comments and suggestons for further refnements. The studes under the Seres are unedted and unrevewed. The vews and opnons expressed are those of the author(s) and do not necessarly reflect those of the Insttute. Not for quotaton wthout permsson from the author(s) and the Insttute. anuary 2008 or comments, suggestons or further nqures please contact: The Research Informaton Staff, Phlppne Insttute for Development Studes 5th loor, NEDA sa Makat Buldng, 106 Amorsolo Street, egasp Vllage, Makat Cty, Phlppnes Tel Nos: (63-2) and ; ax No: (63-2) ; E-mal: publcatons@pds.gov.ph Or vst our webste at

2 Abstract Applyng a conjectural varatons (CV) model ntroduced by Haskel and Scaramozzno (H&S model 1997), the paper examnes the mpact of trade lberalzaton on the Phlppne cement ndustry where alleged cartel actvtes have taken place after the entry of the world s Bg Three cement frms: Holcm, Cemex, and afarge. In the H&S model, the relatonshp between frm behavor and competton s estmated wth prce cost margn (prce mnus margnal costs over prce) as ndcator of competton and proftablty. The model s extended to assess the mpact of mports on competton usng mport penetraton rato as proxy for trade polcy. The paper focuses on the followng questons: dd the removal of mport restrcton and reducton of tarffs affect competton n the cement ndustry? Are mports effectve n dscplnng domestc frms and reducng ther market power? The results mply that mports do not seem to affect proftablty and competton n the ndustry. Gven the ablty of frms to engage n antcompettve behavor and the absence of an effectve competton polcy n the Phlppnes, the gans from trade lberalzaton are nullfed. The country s experence n the cement ndustry llustrates that trade lberalzaton s not a substtute for competton polcy. or mports to effectvely dscplne the market, trade lberalzaton must be accompaned by strct competton polcy. Keywords: cement ndustry, cartel, conjectural varatons, competton, trade lberalzaton

3 Can Imports Dscplne Collusve rms? Case of the Phlppne Cement Industry 1 Rafaelta M. Aldaba 1. Introducton In the Industral Organzaton lterature, conjectural varatons (CV) descrbe how frms thnk others wll react to changes n ther quanttes,.e., the CV summarzes the response of frm j to changes n quantty set by frm. Applyng a CV model ntroduced by Haskel and Scaramozzno (1997), the paper examnes the mpact of trade lberalzaton on the Phlppne cement ndustry where alleged cartel actvtes have taken place after the entry of the world s Bg Three cement frms: Holcm, Cemex, and afarge. In the Haskel and Scaramozzno model (H&S), the relatonshp between frm behavor and competton s estmated wth prce cost margn (prce mnus margnal costs over prce) as ndcator of competton and proftablty. The model s extended to assess the mpact of mports on competton usng mport penetraton rato as proxy for trade polcy. 2. rom protecton and regulaton n the 70s to lberalzaton n the 80s Hstorcally, the Phlppne cement ndustry thrved under a government-sanctoned cartel. Due to the economc slump n the early 1970s, cement frms pushed for government regulaton to prevent cut throat competton. The government allocated supply, controlled prces and regulated entry n the ndustry. However, n the absence of the necessary frm-level nformaton to effcently perform these tasks, the government delegated the settng of producton quotas to the ndustry assocaton. Colluson took place through the frms nformal agreement to set producton quotas and to assgn geographc markets among themselves. Ths practce dvded the country nto regonal markets served by a domnant player whch elmnated competton from takng place. 3. Prce behavor after the entry of the bg 3 n the late 90s As the government pursued market-orented reforms n the 1980s, the ndustry was deregulated and lberalzed. In the early 1990s, the cement companes nvested n capacty expanson; however, they encountered serous fnancal dffcultes due to the Asan fnancal crss. oregn companes came n and bought nto the ndustry through mergers and acqustons. The ndustry whch used to be domnated by several famly-owned frms s now controlled by the world s Bg Three cement companes: Holcm, afarge, and Cemex. 1 Ths s based the author s PhD dssertaton enttled Imports to Dscplne the Market: The Experence of the Phlppne Manufacturng Industry, Unversty of the Phlppnes- School of Economcs, Summer

4 gure 1 shows that pror to 1997, prce movements n the ndustry were farly stable wth prces generally rsng durng the dry season (anuary to May) and fallng durng the rany months (une to December). Wth the crss, prces dropped from P104 per bag n March 1997 to P45 per bag n December 1998; but startng n anuary 1999, prces began to ncrease. Prce per 40 kg bag (n P) gure 1: Average Ex-Plant Prces (at constant 1990 prces) anuary 1993-December oregn buy-ns Post-merger Month & Year The prce ncreases n 1999 concded wth the completon of most mergers and consoldatons n the ndustry. Prces started to go up from P45 n December 1998 to P70 n ebruary Prces steadly rose to P97 by December In May 2000, ex-plant prce/bag was already P109 reachng P132 per bag n May Consderng that the ndustry was facng oversupply and low demand, prce coordnaton was seen as the only explanaton for the prce ncreases. Note also that durng ths perod of rsng prces, there was excess capacty n the world market; mports were comng n and sold at prces lower than those charged by domestc manufacturers. 4. Impact of mports n an ndustry wth collusve behavor 4.2 Haskel & Scaramozzno Model Ths brngs us to the followng questons: dd the removal of mport restrcton and reducton of tarffs affect competton n the cement ndustry? Are mports effectve n dscplnng domestc frms and reducng ther market power? In addressng these questons, the CV model by Haskel and Scaramozzno s appled. Wth prce cost margn (PCM) as a measure of competton and proftablty, the model focuses on the relatonshp between PCM and conjectural varatons by lookng at how the profts of one frm are affected by frm characterstcs such as physcal capacty and fnancal condton. The H&S approach assumes that the conjectures of a frm about the reactons of ts rvals depend on ts own and rval frms physcal and fnancal capacty. The CV of frm 2

5 depends on the capacty utlzaton of other frms because a rval wth excess capacty can easly respond to changes n quanttes of ts compettors. A compettor n fnancal dstress s expected to respond less aggressvely than one whose fnancal condton s more healthy. Prce cost margns are often used to measure the degree of competton n the market. Assumng homogeneous goods ndustry, the frst order condton for proft maxmzaton yelds: s (1) PCM = [ 1 + λ ] ε where PCM s a frm s prce cost margn, s s ts market share, ε s elastcty of demand and λ s frm s conjectural varaton or expectatons about the reacton of other frms to a change n ts quantty. In estmatng λ, the H-S approach allows conjectural varatons to depend on the actual ablty of other frms to respond based on physcal capacty and fnancal capablty. Haskel and Scaramozzno use capacty utlzaton as an ndcator of physcal capacty whle borrowng rato; cash labltes rato; and nterest payment rato are used as ndcators of fnancal poston. Assumng that a frm s conjectures are affected by the characterstcs of the frm tself and of other frms n the ndustry, the λ equaton s modeled as: (2) λ = α0 + α1cu + α2cu + α3s + α4s where S refers to a vector of measures of fnancal status and the subscrpt refers to rvals. To allow responses to dffer between leaders and followers, equaton (40) s rewrtten as: ω ω ω ω ω ω ω ω (3) λ = β1 + β1 CU + β 2 CU + β3 CU + β 4 S + β5 S + β 6 S where ω= (leader); (follower). The H-S approach allows responses to dffer between leaders and followers n the ndustry. The equatons to be estmated are obtaned by substtutng equaton (2) n equaton (1), these are gven by the followng: (4) PCM and (5) t 5 0 ψ adjs 1 = ψ adjms + ψ adjms CU 6 + ψ adjms S 2 + ψ adjms CU K + ψ 7 Y t 3 + ψ adjms CU + E + TD + ε t 4 + ψ adjms S + PCM t = ψ ψ 5 0 adjms adjs 1 + ψ adjms CU 6 + ψ adjms S 2 + ψ adjms CU K + ψ 7 Y t 3 + ψ adjms CU + E + TD + η t 4 + ψ adjms S + where and denote leaders and followers, respectvely; ε t and η t are dsturbances; and E and TD are frm fxed-effects and tme dummes. The subscrpt refers to rvals. adj MS s 3

6 frm s market share adjusted for mports, CU s capacty utlzaton, and S s a vector of measures of fnancal status. 4.2 Analyss of Results Based on frm level data of 18 cement companes coverng the perod 1994 to 2003, the H&S model allows us to estmate frm CVs and examne the mpact of trade lberalzaton. Table 5.9 reports the descrptve statstcs on the man varables used. The prce cost margn (PCM) s calculated usng the followng formula: (6) PCM = Net Sales Cost of Goods Sold Net Sales Data on the Cost of Goods Sold are taken from the frms ncome statements. Ths account conssts of the followng cost tems: power and fuel; raw, packng, and producton materals; deprecaton; repars and mantenance; transportaton; personnel; and others. Table 1: Descrptve Statstcs Varable Obs Mean Std. Dev. Mn Max Prce Cost Margn (PCM) Borrowng Rato (BR) Cash abltes Rato (C) Capacty Utlzaton Rate (CU) Captal-Sales Rato (K/Y) Import Penetraton Rato (MPR) Market Share (MS) Market share adjusted for mports (MS adj ) Effectve Protecton Rate (EPR) Constructon Growth Rate (CGR)

7 Two fnancal ndcators, borrowng rato and cash labltes rato, are computed as follows: (7) (8) Total ong Term Debt BR = Captal Stock Cash and Cash Equvalents C = Total Current abltes The frm s captal stock conssts of fxed captal ncludng buldngs, machnes, transportaton equpment, and other fxed assets such as furnture, fxtures, and offce equpment. The value of captal s measured by the replacement cost of captal, that s, what t would cost today to replace the exstng captal of the frm. The other ndcators such as captal-sales rato s gven by the proporton of the replacement cost of captal to net sales Capacty utlzaton s obtaned by gettng the rato of cement producton to total nstalled capacty. Import penetraton s the proporton of mports to total domestc supply of cement (producton less exports plus mports). Market shares are adjusted by the ndustry share of mports. There are four major players n the ndustry. These frms were able to reach ndvdual annual market shares that ranged from 10 to 15 percent durng the perod 1994 to These frms also had the hghest average market shares durng the perod 1999 to 2003 accountng for an average total share of almost 38 percent of the market. Equatons (4) and (5) are estmated by least squares dummy varable (SDV) regresson technque. Panel data have unobserved, tme-constant factors that affect PCM t known as unobserved or fxed effect and dosyncratc error or tme-varyng error representng unobserved factors that change over tme and affect PCM t. A tradtonal vew of the fxed effects model s to assume that the unobserved effect s a parameter to be estmated for each frm. To estmate fxed or unobserved effects, a dummy varable technque s appled, hence t s called least squares dummy varable regresson or SDV. Under fxed effects, the ntercept s allowed to vary across frms whch may be due to specal features of each company. The results presented n Table 2 suggest that frm nteracton whch depends on the frms physcal capacty and fnancal condton s an mportant determnant of prce cost margn. or leaders, the most mportant determnants are leader frms own physcal condton (adjms t *CU t ) and own fnancal status (adjms t *BR t ) as well as rval leaders physcal (adjms t *CU -,t ) and fnancal (adjms t *BR -,t and adjms t *C -,t ) characterstcs. As the results show, the coeffcent on own market share s postve and hghly sgnfcant. When nteracted wth own capacty utlzaton, the coeffcent turns negatve and hghly sgnfcant. The coeffcent on own market share nteracted wth the capacty utlzaton of major rval frms show a postve and sgnfcant sgn. The results also show that the coeffcent on own 5

8 market share nteracted wth own BR s negatve and hghly sgnfcant. In terms of the effect of fnancal status varables of leader rval frms, the coeffcent on own market share nteracted wth the C of other rval leader players shows a hghly sgnfcant postve sgn. The results also ndcate that the coeffcent on own market share nteracted wth the BR of other rval leaders a hghly postve effect on leaders conjectures. Table 2: rm Conjectures as Determnants of PCM Dependent Varable: eaders ollowers PCM adjms t *** ( ) ( ) adjms t *CU t *** ( ) ** ( ) adjms t *CU -,t * ( ) ( ) adjms t *CU -,t ( ) ( ) adjms t *C t ( ) *** ( ) adjms t *C -,t *** ( ) ( ) adjms t *C -,t ( ) ( ) adjms t *BR t *** ( ) *** ( ) adjms t *BR -,t *** ( ) ( ) adjms t *BR -,t ( ) ( ) (K/Y) t *** ( ) *** ( ) constant *** ( ) *** ( ) R Number of Note: Robust standard errors n parentheses; *** ndcates sgnfcance at the 1 percent level, ** at the 5 percent level, and * at the10 percent level. Wth respect to followers responses, the results tend to ndcate that the physcal and fnancal condtons of mnor players do not seem to matter to major players. The coeffcents on the nteracton varables MS t *CU -,t, MS t *C -,t and MS t *BR -,t all turned out to be nsgnfcant. The coeffcent on K/Y s postve and hghly sgnfcant. The results for followers show that the most mportant determnants are ther own physcal and fnancal condtons. The coeffcent on own market share s negatve but not sgnfcant. Own market shares nteracted wth own CU s postve and sgnfcant at the fve 6

9 percent level. Both the coeffcents on own market share nteracted wth own C and own BR are also postve and hghly sgnfcant. ollowers K/Y s negatve and hghly sgnfcant. The mpled conjectural varatons or λ j s can be computed based on the parameters obtaned from the two estmated equatons. Table 3 presents the average conjectural varatons for major and mnor players. The smplest type of olgopolstc behavour s the Cournot case where λ j = 0. When λ j s between 0 and -1 (where λ j = -1 mples prce-takng behavour), expectaton of prce takng behavour s ndcated. When λ j s between 0 and 1 (where λ j = 1 ndcates monopolstc or cartel behavor), the conjectures mply strategc behavor. Haskel & Scaramozzno (1997) ndcated that a postve sgn s n lne wth cartel/frnge models. Table 3: Estmates of Conjectural Varatons CV Estmate test: λ j =0 λ *** (1, 559)=19.97 Prob>= λ *** (1, 559)=12.06 Prob>= λ (1, 1953)=0.99 Prob>= λ (1, 1953)=1.69 Prob>= λ = λ (1, 559)= 5.22 Prob>= λ = λ (1, 1953)= 0.49 Prob>= λ refers to how major players expect other major players to respond λ refers to how major players expect mnor players to respond λ refers to how mnor players expect other mnor players to respond λ refers to how mnor players expect major players to respond Table 3 shows hghly sgnfcant postve sgns for leaders conjectures on other rval leaders, λ and on followers, λ. The tests suggest that the pont estmates for leaders conjectures on the behavor of other rval leaders, λ and on other rval followers, λ are sgnfcantly dfferent from zero. These results ndcate that leaders conjectures wth respect to other rval leaders and rval followers tend to show strategc behavor. Wth respect to followers, the results show negatve sgns for both followers conjectures on other rval followers, λ and leaders, λ. However, the tests show that these are not statstcally dfferent from zero, hence, the null hypothess of Cournot or non-strategc behavour cannot be rejected. Ths tends to mply that followers have Cournot or nonstrategc conjectures wth respect to the responses of rval leaders and followers. To assess the mpact of trade lberalzaton on the cement ndustry, mport penetraton rato (MPR) 2 whch s used as a proxy for trade varable, s ncorporated n equatons (4) and (5). Table 4 presents the mpact of mports arsng from trade lberalzaton. The results dfferentate the mpact of mport penetraton on the proftablty of leaders and followers. Table 4 ndcates that for leaders, both MPR t and MPR t-1 have the unexpected postve sgn 2 Import Penetraton Rato = [Imports/(Output Exports + Imports)] 7

10 and are hghly sgnfcant. Ths result tends to suggest that for leaders, mports do not have a dscplnng effect wth the coeffcent on MPR ndcatng that hgh mport penetraton s assocated wth hgh PCM or low penetraton of mports s assocated wth low PCM. or followers, the same results are obtaned. On the overall, these results tend to provde weak support for the mport dscplne hypothess. Table 4: Impact of Trade beralzaton on Major and Mnor Players PCM Dependent Varable: PCM MPR *** MS t *** MS t *CU t *** MS t *CU -,t MS t *CU -,t MS t *C t *** MS t *C -,t *** MS t *C -,t eaders MPR t MPR t-1 (wth 1 year lag) *** ( ) ( ) *** ( ) ( ) *** ( ) ( ) ( ) ( ) ( ) ( ) *** ( ) ( ) ** ( ) ( ) ( ) ( ) ollowers MPR t MPR t-1 (wth 1 year lag) *** *** ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) *** *** ( ) ( ) ** ** ( ) ( ) ( ) ( ) ( ) ( ) MS t *BR t ( ) ( ) MS t *BR -,t *** *** ( ) ( ) ( ) ( ) MS t *BR -,t ( ) ( ) ( ) ( ) (K/Y) t *** *** *** *** ( ) ( ) ( ) ( ) Constant *** *** *** ( ) ( ) ( ) ( ) R Number of observatons Note: Robust standard errors n parentheses; *** ndcates sgnfcance at the 1 percent level, ** at the 5 percent level, and * at the10 percent level. 4.3 Testng the mpact of mports based on SCP model The mpact of trade reforms on prce cost margns s further examned by applyng a structure-conduct-performance model. The tradtonal SCP argues that a concentrated 8

11 ndustry (structure) wll facltate colluson (conduct) and hence monopoly prcng (performance). Ths suggests that frms n a concentrated market, f protected from competton through barrers to entry, are expected to generate supra-normal profts. Thus, frms operatng n olgopolstc ndustres wth large market shares are more lkely to coordnate ther prcng and output or to unlaterally engage n antcompettve behavor resultng n hgher proft margns. The model s estmated usng frm-level data and s extended to nclude a trade polcy varable. Two trade proxes are appled, effectve protecton rate 3 and mport penetraton rato. K t (9) PCM t = f MSt, EPRt,, CGRt, I t NSt where MS t : market share of frm whch s expected to be postvely correlated wth the degree of proftablty; EPR t : effectve protecton rate, ths s expected to be postvely correlated wth the prce cost margn K t /NS t : captal-sales rato, whch s a standard regressor used as a control varable snce PCM s measured as operatng proft margn rather than prce and margnal cost. As such, the estmated prce cost margn conssts of both pure proft and return to captal. CGR t : real growth rate of the constructon ndustry I t : frm and tme dummes. The same model s tested usng mport penetraton rato, or MPR. K t (10) PCM t = f MSt, MPRt,, CGRt, I t NSt Based on frm level data from 1995 to 2003, the two equatons are estmated usng fxed effects method wth tme dummes. Random effects and feasble generalzed least squares estmators are also appled. The estmaton results are set out n Tables 5 and 6 wth EPR and MPR as trade polcy varables, respectvely. Tables 5 and 6 show that based on the three methods appled, the coeffcents on EPR and MPR are negatve and postve, respectvely and are sgnfcantly dfferent from zero. Ths tends to mply that cement mports do not have a dscplnng effect on the domestc market. Based on the GS results, the coeffcent on market share s postve and sgnfcant 3 The effectve protecton rate measures the proporton by whch value added measured n domestc prces exceeds the same value added measured at world prces. EPRs measure the net protecton receved by domestc producers from the protecton of ther outputs and the penalty from the protecton of ther nputs. 9

12 at the fve percent level. The coeffcents on captal ntensty and constructon growth rate are both negatve and hghly sgnfcant. Dependent Varable: PCM Table 5: Determnants of PCM (EPR as Trade Polcy Varable) xed Effects Random Effects Method (robust Method (robust standard errors) standard errors) (GS) easble Generalzed east Squares EPR *** ( ) *** ( ) *** ( ) MS ** ** ( ) ( ) ( ) K/Y ** ( ) ( ) ( ) CGR * ( ) ( ) ( ) Constant *** *** *** ( ) ( ) ( ) R 2 wthn between overall Autocorrelaton = = no autocorrelaton test # Prob>= Prob>= No. of obs Note: # or E regresson model, the modfed Wald test for groupwse heteroskedastcty s used whle the Woolrdge test for autocorrelaton n panel data (Ho: no autocorrelaton) s appled. The robust standard errors are Whte s heteroskedastcty-corrected standard errors. *** ndcates sgnfcance at the 1 percent level, ** at the 5 percent level, and * at the10 percent level. Dependent Varable: PCM Table 6: Determnants of PCM (MPR as Trade Polcy Varable) xed Effects Random Effects Method (robust Method (robust standard errors) standard errors) (GS) easble Generalzed east Squares MPR *** ( ) *** ( ) *** ( ) MS ** ** ( ) ( ) ( ) K/Y ** ( ) ( ) ( ) CGR *** *** *** ( ) ( ) ( ) Constant ( ) ( ) ( ) R 2 wthn between overall Autocorrelaton = = no autocorrelaton test # Prob>= Prob>= No. of obs Note: # or E regresson model, the modfed Wald test for groupwse heteroskedastcty s used whle the Woolrdge test for autocorrelaton n panel data (Ho: no autocorrelaton) s appled. The robust standard errors are Whte s heteroskedastcty-corrected standard errors *** ndcates sgnfcance at the 1 percent level, ** at the 5 percent level, and * at the10 percent level. 10

13 5. Conclusons The results show that n the cement ndustry, conjectures and frm nteracton as measured by the frms fnancal condton and physcal capacty are mportant determnants of PCM. PCM depends both on own and rvals physcal capacty and fnancal condton. The results also ndcate that conjectures dffer between leaders and followers: leaders are characterzed by the tendency to engage n strategc behavor whle followers are characterzed by Cournot behavor. Wth respect to the mpact of trade lberalzaton, the results ndcate that mports do not seem to have a dscplnng effect on domestc frms. Gven the behavor of domestc market players, the ncluson of mport penetraton rato n the H&S regresson model shows that for both leaders and followers, the coeffcent on the mport rato s unexpectedly postve and hghly sgnfcant. The results mply that mports do not seem to affect proftablty and competton n the ndustry. Gven the ablty of frms to engage n ant-compettve behavour and the absence of an effectve competton polcy n the Phlppnes, the gans from trade lberalzaton are nullfed. The country s experence n the cement ndustry llustrates that trade lberalzaton s not a substtute for competton polcy. or mports to effectvely dscplne the market, trade lberalzaton must be accompaned by strct competton polcy. References Aldaba, R.M. (2002), Of Cartels and Colluson: An Analyss of the Phlppne Cement Industry Toward a Natonal Competton Polcy for the Phlppnes, edted by E. Medallla, Phlppne Insttute for Development Studes, Makat Cty. Appelbaum, E. (1979). Testng Prce Takng Behavor, ournal of Econometrcs 9, , North-Holland Publshng Company.. (1982). The Estmaton of the Degree of Olgopoly Power, ournal of Econometrcs 19, , North-Holland Publshng Company. Breshnahan, T.. (1989), Emprcal Studes of Industres wth Market Power n Handbook of Industral Organzaton, Volume II, edted by R. Schmalensee & R.D. Wllg, Elsever Scence Publshers BV. eenstra, R. (1995), Estmatng the Effects of Trade Polcy n G. Grossman and K. Rogoff, eds., Handbook of Internatonal Economcs, Volume 3. Harrson, A. (1994), Productvty, Imperfect Competton and Trade Reform, ournal of Internatonal Economcs, 36, pp North Holland. Elsever Scence B.V. Haskel,. & Pasquale Scaramozzno (1997). Do Other rms Matter n Olgopoles? The ournal of Industral Economcs, Volume XV, No. 1, Blackwell Publshers td, Oxford, UK and MA, USA. Iwata, G. (1974). Measurement of Conjectural Varatons n Olgopoly, Econometrca Vol. 42, No.5. amberte, E. D., E. de Dos, D. A. lores,.. Tabbada and E. Ramro Barrers to Entry Study, Volumes I and II. Unted States Agency for Internatonal Development. 11

14 erner, A.P. The Concept of Monopoly and the Measurement of Monopoly Power, The Revew of Economc Studes. evnsohn,. (1993) Testng the Imports-as-Market Dscplne Hypothess, ournal of Internatonal Economcs 35 (1-2), pp 1-22, North Holland, Elsever Scence Publshers B.V Onada Engneerng and Consultng Co. (OECC) Industral Restructurng Studes: Cement. Development Bank of the Phlppnes. Schmalensee, R. (1989), Inter-Industry Studes of Structure and Performance Chapter 16 n Handbook of Industral Organzaton, Volume II, edted by R. Schmalensee & R.D. Wllg, Elsever Scence Publshers BV. Shapro, C. [1989] Theores of Olgopoly Behavor, n R. Schlamensee and R.D. Wllg, eds. Handbook of Industral Organzaton, Vol. I, Elsever Scence Publshers B.V. 12