QUARTERLY JOURNAL OF ECONOMICS ffective collusion and the degree of seller concentration within an industry A tentative hypothesis is herewith advanced to that effect. Given this, we arrive at the hypothesis that there will be a systematic difference in average excess profit rates on sales between highly concentrated oligopolies and other industries. This difference should be found, strictly, even if there are on the average identical entry conditions in So far itry tends to be mo difficult in highly concentrated industries, as seems probable, there is a second reason for larger profit rates with higher concentration As the hypothesis is developed to this point, the predicted profit rate differences are explicitly differences in ratios of excess profit to sales. Because data on profit rates on equity are more readily available, let us inquire whether the predicted relationship should also hold for the ratios of profit to equity. The rate of excess profit sales may be expressed (non-operating costs and revenues being sales revenue minus contractual costs minus imputed interest Readily available profit-rate data are largely in the form of rates of return on investment or on equity before deducting imputed interest The relevant equity rate is sales revenue minus contractual cost stockholders'equ This may also be stated as ales revenue minus contractual costs minus imputed interest lus interest rate stockholders'equity These are of course all average rather than marginal rates. between firms or groups of firms, should the same relation hold among 1. That is, in highly concentrated oligopolistic industries, there will on the average be found more effective express or tacit collusion, and in oligopolistic industries of lower concentration as in industries of relativ structure, there will be found on the average less effective or more imperfec ollusion, more profit destructive rivalry of either an open or secret sort, and tht Bain, "Workable Competition in Oligopoly, "loc. cit, pp. 43-44 g. Cf.J. s 2. It is postulated throughout at this point that there is a theo ent of all magnitudes which appear in these ratios; the cha of such measurement al he possible aberrations in accounting measure discussed 06-10 belo appropriate cost 1. At the same appropriate cost valuation used in calculating imputed nterest