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Measuring the Market Power of the Portuguese Milk Industry

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  • Margarida De Mello
  • Antonio Brandao

Abstract

This paper is based on the previous work of Appelbaum (Journal of Econometrics, 1979, 9, pp. 283-94; 1982, 19, pp. 287-99). Iwata (Econometrics 1974, 42, pp. 947-66) and Rogers (PhD Dissertation, GeorgeWashington University, 1983).We estimate the degree of market power of an oligopolistic industry, using a linear system and the 2SLS estimation method. Our departure point is the work of Appelbaum (1982) where a 'market power index' is estimated for each of the sample's 25 years. As the market power index depends functionally on the conjectural elasticity, the goal is to obtain annual estimates for that elasticity. For this purpose, Appelbaum defines a non-linear simultaneous-equation system and obtains, with non-linear methods, the conjectural elasticity estimates for each year of the sample. Considering the conjectural elasticity's functional form that Appelbaum adopts, we use a different approach and obtain a linear system that is easier to estimate. Due to the particular features of the industry analysed, we also derive a much simpler form for the equations involved. The model's simplicity is appealing and its generalisation to other industries with homogeneous products may be implemented with ease.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 6 (1999)
Issue (Month): 2 ()
Pages: 209-222

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Handle: RePEc:taf:ijecbs:v:6:y:1999:i:2:p:209-222

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Related research

Keywords: Oligopoly; Market Power; Conjectural Elasticity;

References

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  1. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
  2. Iwata, Gyoichi, 1974. "Measurement of Conjectural Variations in Oligopoly," Econometrica, Econometric Society, vol. 42(5), pages 947-66, September.
  3. Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
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Cited by:
  1. Soregaroli, Claudio & Sckokai, Paolo & Moro, Daniele, 2011. "Agricultural policy modelling under imperfect competition," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 195-212, March.
  2. Sandra Rodríuez Piñeros & David K. Lewis, 2005. "Estimating the Imperfection in Sawtimber markets: a case study for the South Pacific Region, Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 63, pages 231-260, Julio-Dic.
  3. Henry Nieuwenhuijsen & Gerrit de Wit & Frank Hindriks, 2000. "Comparative advantages in estimating markups," Scales Research Reports H200003, EIM Business and Policy Research.

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