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The Degree of Collusion in Construction

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Author Info

  • Lever, M.H.C.
  • Nieuwenhuijsen, H.R.
  • van Stel, A.J.

Abstract

In this report Appelbaum's model is discussed in detail. The model is also applied to the Dutch construction sector, allowing the degree of collusion to be ascertained. The model consists of five equations. One equation, the mark-up equation, is derived from the assumption of profit maximization by firms. It is written in such a way that the degree to which firms (tacitly) collude serves as an explanatory variable for the mark-up. More specifically, the higher the observed mark-up the higher the degree of (tacit) collusion, other things being equal. Another equation, the demand equation describes the relation between sales, price and income. Furthermore, three equations are used to describe the factor demands. In an extended version of the model, the degree of collusion is endogenized by the variables net entry of firms and market concentration. The model is estimated simultaneously by FIML (method of full information maximum likelihood).

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Bibliographic Info

Paper provided by NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM in its series Papers with number 9810/e.

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Length: 39 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:miklrr:9810/e

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

Related research

Keywords: ECONOMIC MODELS ; ECONOMETRICS ; ANTITRUST LEGISLATION;

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Cited by:
  1. Marco van Gelderen & Roy Thurik & Micheal Frese, 2000. "Strategies, uncertainty and performance of small business startups," Scales Research Reports H200001, EIM Business and Policy Research.

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