Measuring competition using the Profit Elasticity: American Sugar Industry, 1890-1914
The Profit Elasticity (PE) is a new competition measure introduced in Boone (2008). So far, there was no direct proof that this measure can identify regimes of competition empirically. We�focus on this issue using data of Genesove and Mullin (1998), in which different regimes of competition are identified. We derive a version of PE suitable for this data set. The new competition measure classifies the monopoly/cartel regime correctly as being less competitive than both the price-war regime and break-up of cartel regime.
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