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Market Power, Production (Mis)Allocation and OPEC

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Listed:
  • John Asker
  • Allan Collard-Wexler
  • Jan De Loecker

Abstract

This paper estimates the extent to which market power is a source of production misallocation. Productive inefficiency occurs through more production being allocated to higher-cost units of production, and less production to lower-cost production units, conditional on a fixed aggregate quantity. We rely on rich micro-data covering the global market for crude oil, from 1970 to 2014, to quantify the extent of productive misallocation attributable to market power exerted by the OPEC. We find substantial productive inefficiency attributable to market power, ranging from 14.1 percent to 21.9 percent of the total productive inefficiency, or 105 to 163 billion USD.

Suggested Citation

  • John Asker & Allan Collard-Wexler & Jan De Loecker, 2017. "Market Power, Production (Mis)Allocation and OPEC," NBER Working Papers 23801, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23801
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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