Estimating Monopoly Behavior with Competitive Recycling: An Application to Alcoa

Valerie Suslow

RAND Journal of Economics, 1986, vol. 17, issue 3, 389-403

Abstract: This article develops a structural model of the aluminum industry during the period between World War I and World War II. It takes into account both the intertemporal nature of Alcoa's cost minimization problem and the competitive recycling sector. The model enables estimation of Alcoa's degree of market power, while allowing for the effect of competition from recycled aluminum. Previous work has emphasized Alcoa's control over the size of the secondary sector in the long run as a source of market power for Alcoa. The results here indicate that Alcoa could exert little influence in this regard, but nonetheless had substantial market power.

Date: 1986
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