Market Power with Dynamic Inventory Constraints: The Bias in Standard Measures

Lynn Hunnicutt and David Aadland ()
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Lynn Hunnicutt: Utah State University

Industrial Organization from EconWPA

Abstract: 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.

Keywords: market; power; dynamic; cattle; conjectural; variations; stock (search for similar items in EconPapers)
JEL-codes: Q10 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind
Date: Written
Note: Type of Document -
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Related works:
Working Paper: Market Power with Dynamic Invertory Constraints: The Bias in Standard Measures (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0211024

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