IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Competition Law and Using Prices to Assess Firm Conduct: Some Conceptual Omissions

Listed author(s):
  • Andrew E Burke

In this paper we conduct a re-appraisal of the robustness of tests relating the abuse of market power to measures of price-cost margins and bench mark pricing. We argue that these methods do not control for variations in the correlation between workers' reservation wages and productivity. In the absence of controlling for these effects, these techniques tend to wrongly diagnose an abuse of market power and to penalise firms who are relatively worse affected by the pattern of this correlation across comparison groups. Therefore, high profit firms escape the regulatory net while low profit firms are penalised. It is also found that employment turnover is a useful indicator of the extent to which firms are adversely affected by this factor. At a policy level, the analysis reveals that contrary to recent practice, profit comparisons should be considered in cases of price bench marking and price-wage margins. In addition, the analysis indicates that it is prudent to place the onus of exoneration on fims accused of an abuse of market power, rather than plaintiffs. The results are also relevant to studies which use wages to predict industry performance.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
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.

Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 9610.

in new window

Date of creation: Oct 1996
Handle: RePEc:san:crieff:9610
Contact details of provider: Postal:
School of Economics and Finance, University of St. Andrews, Fife KY16 9AL

Phone: 01334 462420
Fax: 01334 462438
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:san:crieff:9610. 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: (the School of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.