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Beta, Market Power and Wage Rate Uncertainty

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  • Peyser, Paul S

Abstract

This paper derives the formal relationship between a firm's beta and Tobin's q ratio with both price and wage uncertainty present. Wage uncertainty is shown to affect the sign and magnitude of the relationship with q interpreted as an index of the market power. While previous models suggest that systematic risk and market power are negatively related, this result depends either on excluding wage uncertainty or on introducing it with unrealistic restrictions. By deriving a more ambiguous relationship than other authors, a plausible explanation of why empirical research has produced conflicting evidence of the sign of this relationship is provided. Copyright 1994 by Blackwell Publishing Ltd.

Suggested Citation

  • Peyser, Paul S, 1994. "Beta, Market Power and Wage Rate Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 217-226, June.
    • Handle: RePEc:bla:jindec:v:42:y:1994:i:2:p:217-26
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    Cited by:

    1. Lee, Cheng-Few & Chen, K. C. & Liaw, K. Thomas, 1995. "Systematic risk, wage rates, and factor substitution," Journal of Economics and Business, Elsevier, vol. 47(3), pages 267-279, August.
    2. Kit Pong Wong, 1995. "Cournot oligopoly and systematic risk," Journal of Economics and Business, Elsevier, vol. 47(4), pages 385-395, October.
    3. Fabian Hollstein & Marcel Prokopczuk & Christoph Matthias Würsig, 2024. "Market power and systematic risk," Financial Management, Financial Management Association International, vol. 53(2), pages 233-266, June.
    4. Bughin, J., 1999. "Oligopoly profit-sharing contracts and the firm's systematic risk1," European Economic Review, Elsevier, vol. 43(3), pages 549-558, March.

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