Market Structure Conduct Performance (SCP) Hypothesis Revisited using Stochastic Frontier Efficiency Analysis

Use of efficiency measures as a proxy for performance to test the market structure-conduct-performance (SCP) hypothesis is explored. Utilizing Battese and Coelli specification, we estimate stochastic frontier production function and SCP equations with output and efficiency measures as endogenous variables. An empirical application to U.S. trucking carries over the period 1994-2003 with emphasis on the agricultural commodity and refrigerated food products carriers is examined. Results reveal that the variables average haul, average load and market concentration significantly affected the efficiency of firms with 2-8 number of years within each firm.