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Comparative Advantages in Estimating Markups

  • Hindriks, F.A.
  • Nieuwenhuijsen, H.R.
  • de Wit, G.
Registered author(s):

    We compare two methods for estimating a markup: Roeger (1995) on the one hand, and the structural approach of Appelbaum (1982) and Bresnahan (1982) on the other. Toeger estimates the average Lerner index. Furthermore, he uses the assumption of a constant markup as a substitute for data on the level of capital cost, which he takes to be unobservable. We discover an anomaly for Roeger's method and propose an alternative way to estimate it. The structural approach is theoretically superior: it aims at estimating marginal instead of average cost, while it includes more competition-related parameters. Our empirical results indicate that this approach is very sensitive to changes in specification.

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    Paper provided by NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM in its series Papers with number 0003/e.

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    Length: 72 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fth:miklrr:0003/e
    Contact details of provider: Postal: RESEARCH INSTITUTE FOR SMALL AND MEDIUM-SIZED BUSINESS IN THE NETHERLANDS, NEUHUYS.

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