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Measuring Monopoly Power, Revisited

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Abstract

The accuracy of monopoly power measures derived from case studyeconometric models has been questioned recently by Hyde andPerloff (1995) and Boyer (1996). Using the standard industry-formof that model, Hyde and Perloff show that the parameter estimatesassociated with monopoly power are highly sensitive to mis-specificationsof the demand and supply functional forms. Boyer'scriticism is made in principle: he reproves the model for generallyfailing to.“... capture the diversity and complexity of oligopoly ... ”in respect to entry, product differentiation, fixity of capital, capitaladjustment costs, dynamic demand linkages, and variations inmonopoly power over time and in the cross-section of firms. Whilethese several criticisms might appear to point at inherent weaknessesin the case study econometric approach, it is here arguedthat the problem lies in the usual empirical practice.

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Authors and Affiliations

  1. Department of Economics, University of California, Santa Barbara, CA, 93106, U.S.A.

    Clement G. Krouse

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  1. Clement G. Krouse
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Krouse, C.G. Measuring Monopoly Power, Revisited. Review of Industrial Organization 13, 687–696 (1998). https://doi.org/10.1023/A:1007775727046

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