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A New Way to Measure Competition

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Author Info
Jan Boone

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Abstract

This article introduces a new way to measure competition based on firms' profits. Within a general model, we derive conditions under which this measure is monotone in competition, where competition can be intensified both through a fall in entry barriers and through more aggressive interaction between players. The measure is shown to be more robust theoretically than the price cost margin. This allows for an empirical test of the problems associated with the price cost margin as a measure of competition. Copyright © The Author(s). Journal compilation © Royal Economic Society 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02168.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 531 (08)
Pages: 1245-1261
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Handle: RePEc:ecj:econjl:v:118:y:2008:i:531:p:1245-1261

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Stiglitz, Joseph E., 1989. "Imperfect information in the product market," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 13, pages 769-847 Elsevier. [Downloadable!] (restricted)
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  5. Rabah Amir, 2000. "Market Structure, Scale Economies and Industry Performance," Discussion Papers 00-08, University of Copenhagen. Department of Economics. [Downloadable!]
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  6. Boone, J., 2000. "Competition," Discussion Paper 104, Tilburg University, Center for Economic Research. [Downloadable!]
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  7. David Genesove & Wallace P. Mullin, 1998. "Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 355-377, Summer. [Downloadable!] (restricted)
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  9. Jeremy Bulow & Paul Klemperer, 1999. "Prices and the Winner's Curse," Game Theory and Information 9904003, EconWPA. [Downloadable!]
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  10. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July. [Downloadable!] (restricted)
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  13. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  14. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies. [Downloadable!]
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  15. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September. [Downloadable!] (restricted)
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  17. Graddy, K., 1993. "Testing for Imperfect Competition at the Fulton Fish Market," Papers 137, Princeton, Department of Economics - Financial Research Center.
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  18. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  19. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bassanini, Andrea & Nunziata, Luca & Venn, Danielle, 2008. "Job Protection Legislation and Productivity Growth in OECD Countries," IZA Discussion Papers 3555, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Marc Pomp & M. Bijlsma & Machiel van Dijk & Michiel van Leuvensteijn & C. Zonderland, 2005. "Competition in markets for life insurance," CPB Documents 96, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  3. M. van leuvensteijn & C. Kok Sorensen & J.A. Bikker & A.A.R.J.M. van Rixtel, 2008. "Impact of bank competition on the interest rate pass-through in the euro area," DNB Working Papers 171, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  4. Michiel van Leuvensteijn & Jacob Bikker & Adrian van Rixtel & Christoffer Kok-Sorensen, 2007. "A new approach to measuring competition in the loan markets of the euro area," DNB Working Papers 143, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  5. Joëlle Noailly & Richard Nahuis, 2005. "Competition and quality in the notary profession," CPB Documents 94, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  6. Michiel van Leuvensteijn, 2008. "The Boone-indicator: Identifying different regimes of competition for the American Sugar Refining Company 1890-1914," Working Papers 08-37, Utrecht School of Economics. [Downloadable!]
  7. Fabio Feriozzi, 2005. "Career Concerns And Competitive Pressure," Economics Working Papers we056029, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  8. Winfried Koeniger & Omar Licandro, 2006. "On the Use of Substitutability as a Measure of Competition," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  9. Heyman, Fredrik & Svaleryd, Helena & Vlachos, Jonas, 2008. "Competition, Takeovers and Gender Discrimination," Working Paper Series 734, Research Institute of Industrial Economics. [Downloadable!]
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  10. Juselius , Mikael & Kim, Moshe & Ringbom, Staffan, 2009. "Do markup dynamics reflect fundamentals or changes in conduct?," Research Discussion Papers 12/2009, Bank of Finland. [Downloadable!]
  11. Juha Kilponen & Torsten Santavirta, 2005. "Competition and Innovation - Microeconometric Evidence Using Finnish Data," Industrial Organization 0509009, EconWPA. [Downloadable!]
    Other versions:
  12. Jan Boone & Jan van Ours & Henry van der Wiel, 2007. "How (not) to measure competition," CPB Discussion Papers 91, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
    Other versions:
  13. Jaap Bikker & Michiel van Leuvensteijn, 2005. "An Exploration into Competition and Efficiency in the Dutch Life Insurance Industry," DNB Working Papers 047, Netherlands Central Bank, Research Department. [Downloadable!]
  14. Gustavsson Tingvall, Patrik & Karpaty, Patrik, 2008. "Service-sector competition, innovation and R&D," Working Paper Series in Economics and Finance 702, Stockholm School of Economics. [Downloadable!]
  15. Mika Maliranta & Satu Nurmi, 2004. "Do Foreign Players Change the Nature of the Game Among Local Entrepreneurs?," Discussion Papers 942, The Research Institute of the Finnish Economy. [Downloadable!]
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