Validating the Conjectural Variation Method: The Sugar Industry, 1890-1914
The Conjectural Variations (CV) methodology uses the responsiveness of price to cost determinants under differing demand conditions to infer market power and cost. It thus substitutes demand information for complete cost information. In this paper we use the American sugar refining industry at the turn of the century to assess the efficacy of the CV approach. We do so by comparing direct measures of marginal cost and price-cost markups with the indirect estimates obtained from the CV method. We find that the CV method performs reasonably well. It yields estimates of industry conduct that are close to the direct measure we derive from full cost information, and robust to the choice of the functional form of demand. The conduct parameter is underestimated, but the deviation is minimal in our context. The CV methodology does a better job of detecting differences in conduct arising from different structural regimes (corresponding to the aftermath of entry), but only when the researcher imposes the (a priori known) restriction of cost stability.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Oct 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (617) 253-3361
Fax: (617) 253-1330
Web page: http://econ-www.mit.edu/
More information through EDIRC
|Order Information:|| Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hanes, Christopher, 1993. "The Development of Nominal Wage Rigidity in the Late 19th Century," American Economic Review, American Economic Association, vol. 83(4), pages 732-56, September.
- Gollop, Frank M. & Roberts, Mark J., 1979. "Firm interdependence in oligopolistic markets," Journal of Econometrics, Elsevier, vol. 10(3), pages 313-331, August.
- Julio J. Rotemberg & Garth Saloner, 1984.
"A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms,"
349, Massachusetts Institute of Technology (MIT), Department of Economics.
- Julio J. Rotemberg & Garth Saloner, 1984. "A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms," NBER Working Papers 1412, National Bureau of Economic Research, Inc.
- Bresnahan, Timothy F., 1981. "Departures from marginal-cost pricing in the American automobile industry : Estimates for 1977-1978," Journal of Econometrics, Elsevier, vol. 17(2), pages 201-227, November.
- Knetter, Michael M, 1993. "International Comparisons of Price-to-Market Behavior," American Economic Review, American Economic Association, vol. 83(3), pages 473-86, June.
- Lee, Lung-Fei & Porter, Robert H, 1984. "Switching Regression Models with Imperfect Sample Separation Information-With an Application on Cartel Stability," Econometrica, Econometric Society, vol. 52(2), pages 391-418, March.
- Robert N. Rubinovitz, 1993. "Market Power and Price Increases for Basic Cable Service Since Deregulation," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 1-18, Spring.
- Karp, Larry & Perloff, Jeffrey M, 1987.
"Estimating market structure and tax incidence: the Japanese television market,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt8769c17g, Department of Agricultural & Resource Economics, UC Berkeley.
- Karp, Larry S & Perloff, Jeffrey M, 1989. "Estimating Market Structure and Tax Incidence: The Japanese Television Market," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 225-39, March.
- Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
- Slade, Margaret E, 1987. "Interfirm Rivalry in a Repeated Game: An Empirical Test of Tacit Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 499-516, June.
- Valerie Y. Suslow, 1986. "Estimating Monopoly Behavior with Competitive Recycling: An Application to Alcoa," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 389-403, Autumn.
- Pablo T. Spiller & Edgardo Favaro, 1984. "The Effects of Entry Regulation on Oligopolistic Interaction: The Uruguayan Banking Sector," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 244-254, Summer.
- Glenn Ellison, 1994. "Theories of Cartel Stability and the Joint Executive Committee," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 37-57, Spring.
- Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
- Roberts, Mark J., 1984. "Testing oligopolistic behavior," International Journal of Industrial Organization, Elsevier, vol. 2(4), pages 367-383, December.
- Green, Edward J. & Porter, Robert H., 1982.
"Noncooperative Collusion Under Imperfect Price Information,"
367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
- Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
- Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
- Porter, Robert H, 1985. "On the Incidence and Duration of Price Wars," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 415-26, June.
- Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June.
When requesting a correction, please mention this item's handle: RePEc:mit:worpap:95-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Linda Woodbury)
If references are entirely missing, you can add them using this form.