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Comparative Advantages in Estimating Markups

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Author Info
Hindriks, F.A.
Nieuwenhuijsen, H.R.
de Wit, G.

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Abstract

We compare two methods for estimating a markup: Roeger (1995) on the one hand, and the structural approach of Appelbaum (1982) and Bresnahan (1982) on the other. Toeger estimates the average Lerner index. Furthermore, he uses the assumption of a constant markup as a substitute for data on the level of capital cost, which he takes to be unobservable. We discover an anomaly for Roeger's method and propose an alternative way to estimate it. The structural approach is theoretically superior: it aims at estimating marginal instead of average cost, while it includes more competition-related parameters. Our empirical results indicate that this approach is very sensitive to changes in specification.

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Publisher Info
Paper provided by NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM in its series Papers with number 0003/e.

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Length: 72 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:miklrr:0003/e

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Postal: RESEARCH INSTITUTE FOR SMALL AND MEDIUM-SIZED BUSINESS IN THE NETHERLANDS, NEUHUYS.

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Related research
Keywords: COSTS ; MARKET STRUCTURE ; INDUSTRY;

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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
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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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. Hervé Boulhol, 2005. "The upward bias of markups estimated from the price-based methodology," Cahiers de la Maison des Sciences Economiques bla05055, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  2. Hervé Boulhol, 2004. "Capital quasi-fixity and the estimation of markups," Cahiers de la Maison des Sciences Economiques bla05005, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
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