A statistical test of single firm market power

Michael Pickford and Stephen Haslett

New Zealand Economic Papers, 1999, vol. 33, issue 2, 39-58

Abstract: A market structure-performance model is used to search for a structural break in the leading firm market share-profitability relationship. The model, incorporating both market power and efficiency variables to account for variations in price-cost margins, is tested using cross-section 1978/79 Census data for New Zealand manufacturing industries. A novel computational approach using backward and forward cusum and cusum of squared tests based on recursive residuals is used. A statistically significant breakpoint at a top firm market share of 16-17 per cent is found, with the model being much stronger for the sub-set of data above that point.

Date: 1999
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DOI: 10.1080/00779959909544307

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