Review of Industrial Organization (2006) 28:17–39 © Springer 2006
Estimating Market Power in the US
CLAUDIO A. AGOSTINI
Department of Economics, Universidad Alberto Hurtado, Santiago, Chile
Abstract. Before 1978, most of the domestic copper production in the US and an impor-
tant share of imports were traded at a price set by the major US producers. At the same
time, the rest of the world was trading copper at prices determined in auction markets.
This two-price system ended in 1978, when the largest US producers began using the Co-
mex price of reﬁned copper as a benchmark for setting their prices. Using this regime
shift, I empirically test the competitive behavior of the US copper industry before 1978.
The results show that copper prices were close to the levels predicted by a competitive
model of the industry.
Key words: Copper industry, market power.
JEL Classiﬁcations: D40, D43, L13, L61, L72.
Transactions between buyers and sellers of reﬁned copper around the world
are generally conducted using spot prices, which are determined in auction
markets like the London Metal Exchange (LME) or the New York Com-
modity Exchange (Comex). Before 1978, however, all domestic production
and an important share of imports of reﬁned copper in the US were traded
at a price known as the US producer price, which was set by the major US
Some evidence suggests that US copper producers participated in price
collusion during the existence of this two-price system. For example, several
periods display a constant copper price in the US (1951–1952 and 1962–
1963 are the longest) while the LME, a competitive free market, shows
many ﬂuctuations. There were also long periods when domestic prices were
much higher than international prices. During the 1974–1976 period, for
In 1950–1978, imports represented 9% of US reﬁned copper consumption, on
average; around 93% of these imports came from US subsidiaries.