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Testing Market Power with Profit Functions: a Dual Approach with Normalized Quadratic

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  • Gao, Zhifeng
  • Moss, Charles B.

Abstract

The dual relationship between parameters of normalized quadratic cost and profit functions is determined when firms can implement market power on the output market. An approach is developed to test the market power by comparing the profits of a firm with and without market power. Simulations demonstrate the efficiency of this approach.

Suggested Citation

  • Gao, Zhifeng & Moss, Charles B., 2013. "Testing Market Power with Profit Functions: a Dual Approach with Normalized Quadratic," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143105, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea13:143105
    DOI: 10.22004/ag.econ.143105
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    References listed on IDEAS

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    1. Gao, Zhifeng & Featherstone, Allen M., 2008. "Estimating economies of scope using the profit function: A dual approach for the normalized quadratic profit function," Economics Letters, Elsevier, vol. 100(3), pages 418-421, September.
    2. Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers Archive 11112, Iowa State University, Department of Economics.
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