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Firm characteristics and the ability to exercise market power: empirical evidence from the iron ore market

Author

Listed:
  • Robert Germeshausen

    (Centre for European Economic Research (ZEW) Mannheim)

  • Timo Panke

    (University of Cologne)

  • Heike Wetzel

    (University of Kassel)

Abstract

This paper empirically analyzes the existence of market power in the global iron ore market during the period from 1993 to 2012. Using an innovative stochastic frontier analysis approach, we investigate the relationship between individual firm characteristics, macroeconomic conditions and the individual ability of firms to generate markups in the global iron ore market. Our findings indicate that the markups on average amount to 20%. Moreover, location of the main production site and experience measured in years of production are identified to be the most important determinants of the magnitude of firm-specific markups.

Suggested Citation

  • Robert Germeshausen & Timo Panke & Heike Wetzel, 2020. "Firm characteristics and the ability to exercise market power: empirical evidence from the iron ore market," Empirical Economics, Springer, vol. 58(5), pages 2223-2247, May.
    • Handle: RePEc:spr:empeco:v:58:y:2020:i:5:d:10.1007_s00181-018-1610-9
    DOI: 10.1007/s00181-018-1610-9
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    More about this item

    Keywords

    Estimation of market power; Lerner indices; Stochastic frontier analysis; Non-renewable resources;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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