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Asymmetric competition, risk, and return distribution

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  • Mundt, Philipp
  • Oh, Ilfan

Abstract

We propose a parsimonious statistical model of firm competition where structural differences in the strength of competitive pressure and the magnitude of return fluctuations above and below the system-wide benchmark translate into a skewed Subbotin or asymmetric exponential power (AEP) distribution of returns to capital. Empirical evidence from US data illustrates that the AEP distribution compares favorably to popular alternative models such as the symmetric or asymmetric Laplace density in terms of goodness of fit when entry and exit dynamics of markets are taken into account.

Suggested Citation

  • Mundt, Philipp & Oh, Ilfan, 2019. "Asymmetric competition, risk, and return distribution," BERG Working Paper Series 145, Bamberg University, Bamberg Economic Research Group.
    • Handle: RePEc:zbw:bamber:145
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    References listed on IDEAS

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    Cited by:

    1. Scharfenaker, Ellis, 2020. "Implications of quantal response statistical equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
    2. Mundt, Philipp & Alfarano, Simone & Milaković, Mishael, 2020. "Exploiting ergodicity in forecasts of corporate profitability," Journal of Economic Dynamics and Control, Elsevier, vol. 111(C).
    3. Juan Melo, 2024. "Decentralized Finance and Local Public Goods: A Bayesian Maximum Entropy Model of School District Spending in the U.S," Papers 2404.17700, arXiv.org.
    4. repec:uta:papers:2020_05 is not listed on IDEAS
    5. repec:uta:papers:2019_07 is not listed on IDEAS
    6. David Vidal-Tomás & Alba Ruiz-Buforn & Omar Blanco-Arroyo & Simone Alfarano, 2022. "A Cross-Sectional Analysis of Growth and Profit Rate Distribution: The Spanish Case," Mathematics, MDPI, vol. 10(6), pages 1-20, March.
    7. Ellis Scharfenaker, 2022. "Statistical Equilibrium Methods In Analytical Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 276-309, April.

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    More about this item

    Keywords

    return on capital; maximum entropy; asymmetric Subbotin distribution;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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