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Production Functions under Imperfect Competition: A Quality-Equivalent Cournot Model

Author

Listed:
  • Daniel A. Ackerberg
  • Jan De Loecker

Abstract

We discuss the limitations of using unit quantity data to measure output in the estimation of production functions. We introduce a simple model, the quality-equivalent Cournot model, where revenue or deflated revenue is the preferable measure of output as it allows consistent estimation of output elasticities and markups. In contrast, because reported units are not comparable across firms, relying on quantity data for productivity analysis or to generate output elasticities used in the production approach to markup estimation may be problematic.

Suggested Citation

  • Daniel A. Ackerberg & Jan De Loecker, 2026. "Production Functions under Imperfect Competition: A Quality-Equivalent Cournot Model," AEA Papers and Proceedings, American Economic Association, vol. 116, pages 475-482, May.
    • Handle: RePEc:aea:apandp:v:116:y:2026:p:475-482
    DOI: 10.1257/pandp.20261106
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    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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