MARKET CONCENTRATION MEASURES AND INVESTMENT DECISIONS IN MEXICAN MANUFACTURING FIRMS

We study how different measures of market concentration explain investment decisions of Mexican manufacturing firms. The Herfindahl-Hirschman Index is the traditional measure of market structure concentration. The Dominance Index is a competition measure used by Mexican regulators. The econometric assessments suggest that investment decisions of Mexican firms can be better explained by the Dominance Index than by the Herfindahl-Hirschman Index. Thus our results suggest that the Mexican Dominance Index might be useful as a measure of market structure and competition. The results also suggest that market concentration reduces investment. These conclusions are based on several econometric assessments.