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Resolving the conflict on conduct parameter estimation in homogeneous goods markets between Bresnahan (1982) and Perloff and Shen (2012)

Yuri Matsumura and Suguru Otani

Economics Letters, 2023, vol. 229, issue C

Abstract: We revisit conduct parameter estimation in homogeneous goods markets to resolve the conflict between Bresnahan (1982) and Perloff and Shen (2012) regarding the identification and the estimation of conduct parameters. We point out that Perloff and Shen’s (2012) proof is incorrect and its simulation setting is invalid. Our simulation shows that estimation becomes accurate when demand shifters are properly added in supply estimation and sample sizes are increased, supporting Bresnahan (1982).

Keywords: Conduct parameters; Homogeneous goods market; Multicollinearity problem; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C13 C5 L1 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002185

DOI: 10.1016/j.econlet.2023.111193

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