Comparative Advantages in Estimating Markups

F.A. Hindriks, H.R. Nieuwenhuijsen and G. de Wit

Working Papers from NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM

Abstract: We compare two methods for estimating a markup: Roeger (1995) on the one hand, and the structural approach of Appelbaum (1982) and Bresnahan (1982) on the other. Toeger estimates the average Lerner index. Furthermore, he uses the assumption of a constant markup as a substitute for data on the level of capital cost, which he takes to be unobservable. We discover an anomaly for Roeger's method and propose an alternative way to estimate it. The structural approach is theoretically superior: it aims at estimating marginal instead of average cost, while it includes more competition-related parameters. Our empirical results indicate that this approach is very sensitive to changes in specification.

Keywords: COSTS; MARKET STRUCTURE; INDUSTRY (search for similar items in EconPapers)
JEL-codes: D43 L13 L60 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2000
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Citations: View citations in EconPapers (6)

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