Structure, conduct & performance in the New Zealand wool scouring industry

Abstract

This thesis is an investigation into the efficiency of resource use in the New Zealand Wool Souring Industry. The principle hypothesis is that the mix of resources used by the industry is applied optimally in relation to the demand for scouring services. Therefore the industry is maximizing its contribution to the community. The methodology employed is Industrial Organizational Analysis. It is a method pioneered by Professor J. S. Bain to study American Industry. It is a descriptive rather than an analytical technique and serves to identify problems or unsatisfactory performances within industries. The perfect market concept is central to the methodology and acts as a model to determine the cases of irregularities in performance. Industry performance can be measured in terms of technical and allocative efficiency. The former is concerned with the scale of operations in the industry and the latter with the overall allocation of resources. With technical efficiency it is important to establish the potential economies of scale in relation to the capacities of plants in the industry. It was found in the scouring industry that economies of scale were insignificant and the capacities of most plants adequate to take advantage of available technical efficiencies. However it became apparent early in the study that a serious over-capacity existed in the industry. A large part of the blame for this defect could be linked back to institutional regulation governing price setting within the industry.