A New Method for Estimating Market Power with an Application to Norwegian Sawmilling

A New Method for Estimating Market Power with an Application to Norwegian Sawmilling In this paper we apply an innovative econometric tool to estimate mark-ups in an output market. The contribution of the paper is in the novel use of the stochastic frontier approach that is widely used to estimate efficiency. We show that this method, which we call the stochastic frontier estimator of market power, can be used both in the dual cost function framework and in the primal framework, and that mark-ups can be estimated with or without constant returns to scale. We apply this method to the Norwegian sawmilling industry, 1974–91. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

A New Method for Estimating Market Power with an Application to Norwegian Sawmilling

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-012-9339-7
Publisher site
See Article on Publisher Site

Abstract

In this paper we apply an innovative econometric tool to estimate mark-ups in an output market. The contribution of the paper is in the novel use of the stochastic frontier approach that is widely used to estimate efficiency. We show that this method, which we call the stochastic frontier estimator of market power, can be used both in the dual cost function framework and in the primal framework, and that mark-ups can be estimated with or without constant returns to scale. We apply this method to the Norwegian sawmilling industry, 1974–91.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Feb 3, 2012

References

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