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Are There Any Cournot Industries?

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  • David Flath

Abstract

For 70 Japanese manufacturing industries, I test the simple Cournot hypothesis of proportionality between industry price-cost margin and Herfindahl index against the non-nested alternative that the industry price-cost margin remains constant in the face of varying Herfindahl index, as it would under a simple product differentiated Bertrand framework. I then test each of these against the alternative hybrid specification that nests both of them, and from the pairwise tests, compute likelihoods of each specification. The simple Cournot specification is the most likely for five of the industries, the simple Bertrand specification for 35, and the hybrid specification for 30.

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  • David Flath, 2010. "Are There Any Cournot Industries?," ISER Discussion Paper 0766, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0766
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2010/DP0766.pdf
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    References listed on IDEAS

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    1. Flath, David, 2011. "Industrial concentration, price-cost margins, and innovation," Japan and the World Economy, Elsevier, vol. 23(2), pages 129-139, March.
    2. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-274, August.
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    1. Flath, David, 2011. "Industrial concentration, price-cost margins, and innovation," Japan and the World Economy, Elsevier, vol. 23(2), pages 129-139, March.

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