Wang, Shinn-Shyr (U of Wisconsin) Stiegert, Kyle W. Dhar, Tirtha P. (U of British Columbia)
Abstract
In this paper, we develop and estimate a model of strategic firm behavior under financial market uncertainty. The model employs an objective function derived from the capital asset pricing model (CAPM), which draws theoretical linkages between product market uncertainty and financial market returns. An interesting feature of the model is that profit maximization enters as a nested component of the general market value maximization (MVM) model. The model is tested using 4-week interval retail scanner data for margarine and butter from 1998-2002. The traditional profit maximization model is rejected in favor of the proposed MVM structure. Counterfactual simulations point toward significant biases in estimated Lerner indexes when capital market dimensions are ignored or if the wrong market structure is assumed.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number
495.
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
References listed on IDEAS 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.: