Measuring Market Power in U.S. Industry
Non-competitive conduct can be assessed by estimating the size of the markup or Lerner index achieved in a market. The markup implies a price elasticity of demand faced by the representative firm. For a given markup, non-competitive conduct is greater the more elastic is the market elasticity of demand. The ratio of the firm's to the market elasticity is a measure of non-competitive conduct that is insensitive to the value of the monopoly. To implement this measure, both the firm's and the market elasticities of demand must be estimated. Hall shows how to estimate the markup, and hence the elasticity faced by the firm, from the cyclical behavior of productivity. To estimate the market elasticity, an instrumental variables procedure exploiting a covariance restriction between productivity shocks and demand shocks is used. Results for broad sectors of private industry and for non-durable manufacturing industries display a wide range of monopoly power.
|Date of creation:||Apr 1987|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Hall, Robert E., 1987. "Productivity and the business cycle," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 421-444, January.
- Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
- J. Hausman & W. E. Taylor, 1981.
"Identification in Linear Simultaneous Equations Models with Covariance Restrictions: An Instrumental Variables Interpretation,"
280, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hausman, Jerry A & Taylor, William E, 1983. "Identification in Linear Simultaneous Equations Models with Covariance Restrictions: An Instrumental Variables Interpretation," Econometrica, Econometric Society, vol. 51(5), pages 1527-49, September.
- Bruno, Michael, 1978. "Duality, Intermediate Inputs and Value-Added," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 1 McMaster University Archive for the History of Economic Thought.
- Robert E. Hall, 1986. "Market Structure and Macroeconomic Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(2), pages 285-338.
- Matthew D. Shapiro, 1987.
"Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?,"
NBER Working Papers
2147, National Bureau of Economic Research, Inc.
- Shapiro, Matthew D, 1987. "Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?," American Economic Review, American Economic Association, vol. 77(2), pages 118-24, May.
- Matthew D. Shapiro, 1987. "Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?," Cowles Foundation Discussion Papers 822, Cowles Foundation for Research in Economics, Yale University.
- Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
- Hall, Robert E, 1988.
"The Relation between Price and Marginal Cost in U.S. Industry,"
Journal of Political Economy,
University of Chicago Press, vol. 96(5), pages 921-47, October.
- Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
- Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Appelbaum, Elie, 1982. "The estimation of the degree of oligopoly power," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 287-299, August.
- Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
- Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
- Robert E. Hall, 1986. "Chronic Excess Capacity in U.S. Industry," NBER Working Papers 1973, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2212. 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: ()
If references are entirely missing, you can add them using this form.