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THE STRUCTURE, CONDUCT, AND PERFORMANCE OF THE AMERICAN CASKET INDUSTRY
Abstract
This dissertation describes and analyzes the structure, conduct and performance of the American casket industry. Its primary purpose is to serve as a guide for assessing public policies toward the industry. Primary data for the study were obtained through correspondence with the Casket Manufactures Association of America and interviews with several representatives of large casket manufacturers and local funeral directors. These data were supplemented with information obtained from the Bureau of the Census, Census of Manufactures, and various other public documents and reference works. Analysis of casket industry structure indicates that the industry is an oligopoly of low-moderate concentration. Since 1963, the number of firms in the industry has declined and concentration has increased. Inter-corporate ownership is present, but it does not appreciably alter the structure of the industry. Application of the survivor test leads to the conclusion that scale economics are not significant in the production of caskets. Entry barriers into the casket industry seem very low. Although alternatives exist to the purchase of a casket, the number of caskets sold each year is almost exclusively determined by total mortality. Bain's structural classification of an oligopolistic industry with easy entry and without product differentiation summarizes the structure of the casket industry. The conduct of the casket industry is characterized by modest price increases and an absence of price leadership. Casket price differences do not equal cost differences, therefore, casket prices are discriminatory. These discriminatory prices, however, are not an indication of a severe misallocation of resources. Rather, they reflect a modicum of monopoly power manifested in some disparity in the price and cost margins of different caskets. Product development is present in the industry, but it is not pervasive or periodic. For this reason, casket firms emphasize service promotion such as rapid delivery and sales aids. Investigation of casket industry performance indicates that the industry exhibits an absence of economic profits and excess capacity, a small percentage of industry output produced by smaller than optimal plants, and significant productivity gains. This performance was judged to be very acceptable for an oligopoly of low-moderate concentration. During the course of the study, a merger between the second and third largest casket companies was consummated. This merger immediately raised the four-firm concentration ratio of the industry by approximately 5 points. It is too soon, however, to evaluate the impact the merger will have upon the conduct or performance of the industry. At this time, the casket industry is a relatively efficient, technically progressive oligopoly of low-moderate concentration. Its performance is satisfactory and consistent with its structure.
Subject Area
Economics
Recommended Citation
VAUGHAN, MICHAEL B, "THE STRUCTURE, CONDUCT, AND PERFORMANCE OF THE AMERICAN CASKET INDUSTRY" (1980). ETD collection for University of Nebraska-Lincoln. AAI8100782.
https://digitalcommons.unl.edu/dissertations/AAI8100782