Market Power with Dynamic Inventory Constraints: The Bias in Standard Measures
This paper incorporates inventory dynamics into an analysis of market power. Using a model in which each firm accounts for the effect of its current action on the current and future actions of itself and its competitors, we show that measures of market power that ignore inventory dynamics are biased. We then apply the model to the beef-packing industry using annual data on cattle stocks, slaughter and prices from 1933-1999. Our estimates suggest that static measures overestimate the amount of market power exerted by beef-packing firms.
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.:
- Driskill, Robert A. & McCafferty, Stephen, 1989. "Dynamic duopoly with adjustment costs: A differential game approach," Journal of Economic Theory, Elsevier, vol. 49(2), pages 324-338, December.
- Schroeter, John R, 1988.
"Estimating the Degree of Market Power in the Beef Packing Industry,"
The Review of Economics and Statistics,
MIT Press, vol. 70(1), pages 158-162, February.
- Schroeter, John R., 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," Staff General Research Papers Archive 11114, Iowa State University, Department of Economics.
- Roberts, M.J. & Samuelson, L., 1988.
"An Empirical Analysis Of Dynamic, Non-Price Competition In An Oligopolistic Industry,"
3-88-14, Pennsylvania State - Department of Economics.
- Mark J. Roberts & Larry Samuelson, 1988. "An Empirical Analysis of Dynamic, Nonprice Competition in an Oligopolistic Industry," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 200-220, Summer.
- Weliwita, Ananda & Azzam, Azzeddine M., 1996. "Identifying Implicit Collusion Under Declining Output Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(02), December.
- Michael H. Riordan, 1985. "Imperfect Information and Dynamic Conjectural Variations," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 41-50, Spring.
- Rosen, S. & Murphy, K.M. & Scheinkman, J.A., 1993.
University of Chicago - Economics Research Center
93-2, Chicago - Economics Research Center.
- Baak, Saang Joon, 1999. "Tests for bounded rationality with a linear dynamic model distorted by heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1517-1543, September.
- Pindyck, Robert S, 1985.
"The Measurement of Monopoly Power in Dynamic Markets,"
Journal of Law and Economics,
University of Chicago Press, vol. 28(1), pages 193-222, April.
- Pindyck, Robert S., 1984. "The measurement of monopoly power in dynamic markets," Working papers 1540-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
- Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers Archive 11112, Iowa State University, Department of Economics.
- 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.
- Muth, Mary K. & Wohlgenant, Michael K., 1998. "A Model Of Imperfect Competition Using Marginal Input And Output Prices: Application To The Beef Packing Industry," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20853, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- David Aadland & DeeVon Bailey, 2001. "Short-Run Supply Responses in the U.S. Beef-Cattle Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 826-839.
- Dockner, Engelbert J, 1992. "A Dynamic Theory of Conjectural Variations," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 377-395, December.
- Jarvis, Lovell S, 1974. "Cattle as Capital Goods and Ranchers as Portfolio Managers: An Application to the Argentine Cattle Sector," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 489-520, May/June.
- Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
- Azzam, Azzeddine M, 1997. "Measuring Market Power and Cost-Efficiency Effects of Industrial Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 377-386, December.
- Nerlove, Marc & Fornari, Ilaria, 1998. "Quasi-rational expectations, an alternative to fully rational expectations: An application to US beef cattle supply," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 129-161.
- Corts, Kenneth S., 1998. "Conduct parameters and the measurement of market power," Journal of Econometrics, Elsevier, vol. 88(2), pages 227-250, November.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0211024. 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: (EconWPA)
If references are entirely missing, you can add them using this form.