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Competition: Theoretical Parameterizations and Empirical Measures

Jan Boone

Journal of Institutional and Theoretical Economics (JITE), 2008, vol. 164, issue 4, 587-611

Abstract: This paper proposes relative profits (RP) as a robust measure of competition. I consider nine different parameterizations of competition and show that more intense competition increases the profits of a firm relative to a less efficient firm. Further, popular competition measures like the price-cost margin (PCM) and Herfindahl index (H) can either increase or decrease in response to more intense competition. In this sense, RP is a more robust competition measure than PCM and H.

JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2008
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