Competition and Dispersion in Rates of Return: A Note

THE RELATIONSHIP BETWEEN COMPETITION AND RATES OF RETURN IS IMPORTANT BECAUSE IT GIVES INSIGHT INTO THE WAY AND THE EXTENT TO WHICH COMPETITION WORKS AND BECAUSE IT BEARS UPON THE COSTS TO SOCIETY OF RESTRICTION ON COMPETITION. IT IS ALSO IMPORTANT TO LOOK AT THE ASSOCIATION BETWEEN COMPETITION AND DISPERSION IN RATES OF RETURN, SINCE IT PROVIDES INSIGHTS INTO ANOTHER DIMENSION OF THE LEVELING EFFECTS OF COMPETITION AND INDICATES THE CONDITIONS UNDER WHICH AN INDUSTRY MEAN MAY BE TAKEN AS REPRESENTATIVE OF THE RETURN EXPERIENCE OF FIRMS WITHIN THAT INDUSTRY. THE STATISTICAL RESULTS INDICATE A TENDENCY TOWARD A LEVELING OF RATES OF RETURN ACROSS AND WITHIN COMPETITIVELY ORGANIZED INDUSTRIES. IT IS SHOWN THAT THE INTER INDUSTRY RETURN DISPERSION IS GREATER IN INDUSTRIES WHERE COMPETITION IS IMPEDED, AND THE INTRA INDUSTRY RETURN DISPERSION IS GREATER IN THE LESS COMPETITIVE INDUSTRIES. TABLE.