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Determining market power exertion between buyers and sellers

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Author Info
Kellie Curry Raper (Department of Agricultural Economics, Michigan State University, East Lansing, MI 48824-1039, USA)
H. Alan Love (Department of Agricultural Economics, Texas A&M University, Blocker Building, College Station, TX 77843-2124, USA)
C. Richard Shumway (Department of Agricultural Economics, Washington State University, Pullman, WA 99164-6210, USA)
Abstract

Empirical techniques commonly used in industrial organization to measure market power exertion typically assume imperfectly competitive behaviour by firms on only one side of the market. Firms on the other side are assumed to be perfectly competitive. In this paper we extend traditional NEIO methods by developing a method to estimate market power exertion when firms on both sides have potential market power. Using Monte Carlo simulations, we find that the model correctly estimates market power exercised by firms on either or both sides of a market and also correctly estimates firms' technology parameters. When applied to the US leaf tobacco market, findings indicate that cigarette manufacturers exert some monopsony power in purchasing leaf tobacco while producers, organized as a cartel, exhibit no countervailing monopoly market power. Copyright © 2000 John Wiley & Sons, Ltd.

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File URL: http://qed.econ.queensu.ca:80/jae/2000-v15.3/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 15 (2000)
Issue (Month): 3 ()
Pages: 225-252
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Handle: RePEc:jae:japmet:v:15:y:2000:i:3:p:225-252

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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.:

  1. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June. [Downloadable!] (restricted)
  2. Atkinson, Scott E & Kerkvliet, Joe, 1989. "Dual Measures of Monopoly and Monopsony Power: An Application to Regulated Electric Utilities," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 250-57, May. [Downloadable!] (restricted)
  3. Schroeter, John R, 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 158-62, February. [Downloadable!] (restricted)
    Other versions:
  4. Daniel Sullivan, 1989. "Monopsony Power in the Market for Nurses," NBER Working Papers 3031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  6. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92. [Downloadable!] (restricted)
  7. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Blackwell Publishing, vol. 38(113), pages 1-12, January. [Downloadable!] (restricted)
  8. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August. [Downloadable!] (restricted)
  9. Roger Feldman & Richard Scheffler, 1982. "The union impact on hospital wages and fringe benefits," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 35(2), pages 196-206, January.
  10. Brown, A. Blake & Martin, Laura L., 1996. "Price Versus Quota Reductions: U.S. Flue-Cured Tobacco Policy," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(02), December. [Downloadable!]
  11. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99. [Downloadable!] (restricted)
  12. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February. [Downloadable!] (restricted)
  13. Robert E. Hall, 1988. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October. [Downloadable!] (restricted)
  15. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October. [Downloadable!] (restricted)
  16. Sullivan, Daniel, 1989. "Monopsony Power in the Market for Nurses," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages S135-78, October.
  17. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March. [Downloadable!] (restricted)
  18. Pollak, Robert A. & Wales, Terence J., 1991. "The likelihood dominance criterion : A new approach to model selection," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 227-242, February. [Downloadable!] (restricted)
    Other versions:
  19. Ashenfelter, Orley & Sullivan, Daniel, 1987. "Nonparametric Tests of Market Structure: An Application to the Cigarette Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 483-98, June. [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. Kellie Curry Raper & Corinna M. Noelke, 2004. "Determining market power exertion between buyers and sellers: are nonparametrics a viable alternative?," Applied Economics, Taylor and Francis Journals, vol. 36(20), pages 2265-2274, November. [Downloadable!] (restricted)
  2. Gerry E. Boyle, 2004. "Hall-Roeger Tests of Market Power in Irish Manufacturing Industries," The Economic and Social Review, Economic and Social Studies, vol. 35(3), pages 289-304. [Downloadable!]
  3. Dae-Wook Kim & Christopher R. Knittel, 2004. "Biases in Static Oligopoly Models? Evidence from the California Electricity Market," NBER Working Papers 10895, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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