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Estimation of competitive conduct when firms are efficiently colluding: addressing the Corts critique

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  • Steven Puller

Abstract

I address a recent critique by Corts (1999) who finds that traditional approaches in New Empirical Industrial Organization to estimate the competitive conduct in an oligopoly market can yield inconsistent estimates of the conduct parameter if firms are engaged in efficient collusion. This article derives a general empirical model that allows consistent estimation of the conduct parameter that is robust to efficient collusion.

Suggested Citation

  • Steven Puller, 2009. "Estimation of competitive conduct when firms are efficiently colluding: addressing the Corts critique," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1497-1500.
  • Handle: RePEc:taf:apeclt:v:16:y:2009:i:15:p:1497-1500
    DOI: 10.1080/13504850701578900
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    Cited by:

    1. Levent Kutlu & Robin C. Sickles, 2017. "Measuring market power when firms price discriminate," Empirical Economics, Springer, vol. 53(1), pages 287-305, August.
    2. Kutlu, Levent & Sickles, Robin & Tsionas, Mike G., 2019. "Heterogeneous Decision-Making and Market Power," Working Papers 19-008, Rice University, Department of Economics.
    3. Bhattacharyya, Aditi & Kutlu, Levent & Sickles, Robin C., 2018. "Pricing Inputs and Outputs: Market prices versus shadow prices, market power, and welfare analysis," Working Papers 18-009, Rice University, Department of Economics.
    4. Levent Kutlu & Ran Wang, 2018. "Estimation of cost efficiency without cost data," Journal of Productivity Analysis, Springer, vol. 49(2), pages 137-151, June.
    5. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.
    6. Oleksandr Shcherbakov & Naoki Wakamori, 2017. "Identifying the Degree of Collusion Under Proportional Reduction," Staff Working Papers 17-51, Bank of Canada.
    7. Juan Luis Jiménez & Jordi Perdiguero, 2018. "Mergers and difference-in-difference estimator: Why firms do not increase prices?," European Journal of Law and Economics, Springer, vol. 45(2), pages 285-311, April.
    8. Luis Orea & Jevgenijs Steinbuks, 2018. "Estimating Market Power In Homogenous Product Markets Using A Composed Error Model: Application To The California Electricity Market," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1296-1321, April.
    9. Hideki Murakami, 2012. "Dynamic Effect of Low-Cost Entry on the Conduct Parameter: An Early-Stage Analysis of Southwest Airlines and America West Airlines," Discussion Papers 2012-25, Kobe University, Graduate School of Business Administration.
    10. Murakami, Hideki & Amano, Yoshihisa & Asahi, Ryota, 2015. "Dynamic effect of inter-firm rivalry on airfares: Case of Japan's full-service and new air carriers," Journal of Air Transport Management, Elsevier, vol. 44, pages 25-33.
    11. Bernardita Piedrabuena, 2013. "Competencia en el mercado bancario del crédito en Chile," IDB Publications (Working Papers) 4630, Inter-American Development Bank.
    12. Kutlu, Levent & Sickles, Robin C., 2012. "Estimation of market power in the presence of firm level inefficiencies," Journal of Econometrics, Elsevier, vol. 168(1), pages 141-155.
    13. Garcia, Devin & Kutlu, Levent & Sickles, Robert C., 2018. "Market Structures in Production Economics," Working Papers 18-007, Rice University, Department of Economics.

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