The Panzar–Rosse H Statistic and Monopoly. Issues on its Use as a Market Power Measure

J. Manuel Sánchez-Cartas

The B.E. Journal of Economic Analysis & Policy, 2020, vol. 20, issue 4, 11

Abstract: This note emphasizes some flaws of the Panzar–Rosse H statistic to address market power. First, I show that it is more related to the pass-through rate than to a market power measure, which implies reconsidering its interpretation and use. Second, I show that the inclusion of other strategic variables rather than prices or quantities may lead to contradictory predictions about market power. Therefore, competition authorities should refrain from using the H statistic to rule out significant market power because it is not a well-behaved measure of the degree of competition.

Keywords: H statistic; market power; Panzar–Rosse; pass-through rate (search for similar items in EconPapers)
JEL-codes: L11 L12 L41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/bejeap-2020-0193

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