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A New Way to Measure Competition

  • Jan Boone

This article introduces a new way to measure competition based on firms' profits. Within a general model, we derive conditions under which this measure is monotone in competition, where competition can be intensified both through a fall in entry barriers and through more aggressive interaction between players. The measure is shown to be more robust theoretically than the price cost margin. This allows for an empirical test of the problems associated with the price cost margin as a measure of competition. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02168.x
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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 531 (08)
Pages: 1245-1261

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Handle: RePEc:ecj:econjl:v:118:y:2008:i:531:p:1245-1261
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  1. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
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  8. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
  9. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
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  11. Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society.
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  13. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
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