Abstract

Two competing hypotheses on market structure and performance of firms are the
traditional structure-conduct-performance (SCP) paradigm and the efficiency structure
hypothesis. This paper reveals the profits made by firms in the trucking industry were because of
greater efficiencies than their competitors and not because of collusive activities.

Introduction and Discussion

Truck transportation, being an important service-providing sector, represents a significant
part of the U. S. economy. For example, truck transportation is the dominant mode in the United
States for foodstuffs particularly those with high value and requiring controlled temperature and
humidity. This sector hauls 95% of the interstate shipments of produce (Beilock and Ciello,
2004). Additionally, truck carriers play a vital role in facilitating economic activity between
sectors and across regions (Lahiri and Yao, 2004). Therefore, it is very important to evaluate the
market structure, market share and profits of these firms. One way to evaluate the U.S. trucking
industry is to use the traditional structure-conduct-performance paradigm. In the traditional
structure-conduct-performance (SCP) paradigm, increased concentration would suggest that
truck carriers may have colluded or the performance of these carriers is the result of anti-
competitive practices. More specifically, the standard SCP paradigm asserts there is a direct
relationship between the degree of market concentration and the degree of competition among
firms. This hypothesis is true if a positive relationship exists between market concentration
(measured by industry concentration) and performance (measured by profits), regardless of firm
efficiency (measured by market share). Thus firms in more concentrated industries will earn
higher profits than firms operating in less concentrated industries, irrespective of their efficiency.

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