When is the Price Cost Margin a Safe Way to Measure Changes in Competition?
AbstractThe price cost margin (PCM) is a popular way to measure competition. Although we know that this measure is not without problems, we actually do not know how often and under which conditions a change in PCM points in the wrong direction. We use a new competition measure, the profit elasticity, which is more robust than PCM. Our empirical analysis based on Dutch data shows that when competition changes the probability that PCM points in the wrong direction increases with industry concentration. Copyright Springer Science+Business Media New York 2013
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Bibliographic InfoArticle provided by Springer in its journal De Economist.
Volume (Year): 161 (2013)
Issue (Month): 1 (March)
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Web page: http://www.springerlink.com/link.asp?id=100260
Competition; Profit elasticity; Price cost margin; Measures of competition; Concentration; D43; L13;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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