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Estimating the size distribution of firms using government summary statistics

  • Golan, Amos
  • Judge, George G.
  • Perloff, Jeffrey M.

Using a maximum entropy technique, we estimate the market shares of each firm in an industry using the available government summary statistics such as the four-firm concentration ratio (C4) and the Herfindahl-Hirschmann Index (HHI). We show that our technique is very effective in estimating the distribution of market shares in 20 industries. Our results provide support for the recent practice of using HHI rather than C4 as the key explanatory variable in many market power studies, if only one measure is to be used.

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Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt14b416tk.

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Date of creation: 01 Apr 1995
Date of revision:
Handle: RePEc:cdl:agrebk:qt14b416tk
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  1. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-69, June.
  2. Kwoka, John E, Jr, 1979. "The Effect of Market Share Distribution on Industry Performance," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 101-09, February.
  3. Zellner, A., 1988. "Optimal Information-Processing And Bayes' Theorem," Papers m8803, Southern California - Department of Economics.
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