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Measuring Market Power in a Dynamic Oligopoly Model: The Dallas-Forth Worth Milk Market Case

Donghun Kim
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Donghun Kim: International University of Japan, http://www.iuj.ac.jp/

No EMS_2006_06, Working Papers from Research Institute, International University of Japan

Abstract: We derive a dynamic structural model based on a dynamic supergame model and measure market power for the Dallas-Forth Worth milk market in the U.S. In particular, we analyze the cyclical behavior of firm conduct and evaluate bias in static market-power measures in a unified manner by deriving and estimating a dynamic first-order condition for profit maximization. We find that firm conduct in the Dallas-Forth Worth milk market is countercyclical against demand shocks and expected future cost shocks. We also demonstrate that the conduct parameter in a static model underestimates true market power if firms' behaviors are posited by a dynamic supergame.

Keywords: Dallas-Fort Worth Milk Market; Conduct Parameter; Dynamic Supergame; Market Power; Collusion (search for similar items in EconPapers)
JEL-codes: D4 L0 Q0 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006-01
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