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Measuring Market Power in a Dynamic Oligopoly Model: The Dallas-Forth Worth Milk Market Case

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Abstract

We derive a dynamic structural model based on a dynamic supergame model and measure market power for the Dallas-Forth Worth milk market in the U.S. In particular, we analyze the cyclical behavior of firm conduct and evaluate bias in static market-power measures in a unified manner by deriving and estimating a dynamic first-order condition for profit maximization. We find that firm conduct in the Dallas-Forth Worth milk market is countercyclical against demand shocks and expected future cost shocks. We also demonstrate that the conduct parameter in a static model underestimates true market power if firms' behaviors are posited by a dynamic supergame.

Suggested Citation

  • Donghun Kim, 2006. "Measuring Market Power in a Dynamic Oligopoly Model: The Dallas-Forth Worth Milk Market Case," Working Papers EMS_2006_06, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2006_06
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    References listed on IDEAS

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    Cited by:

    1. Piedrabuena, Bernardita, 2013. "Competencia en el mercado bancario del crédito en Chile," IDB Publications (Working Papers) 4630, Inter-American Development Bank.
    2. Orea, Luis, 2007. "Estimating Firm-Specific Market Power: A Composed Error Term Approach," Efficiency Series Papers 2007/02, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    3. Mustafa U. Karakaplan & Levent Kutlu, 2019. "Estimating market power using a composed error model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 489-510, September.

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    More about this item

    Keywords

    Dallas-Fort Worth Milk Market; Conduct Parameter; Dynamic Supergame; Market Power; Collusion;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L0 - Industrial Organization - - General
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General

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