Interpreting Markups in Spanish Manufacturing: The Exponential Model

  • Luis C. CorchónEmail author
  • Lourdes Moreno
Part of the Springer Series in Game Theory book series (SSGT)


In this paper, we present a model of oligopolistic competition where demand functions are exponential. We show that in such a model there is a unique Cournot equilibrium. This model predicts a monotonic relationship between the markup of a firm and its output. We present evidence, based on a sample of Spanish manufacturing firms, that this relationship is inverse.


Nash Equilibrium Order Condition Exponential Model Profit Maximization Representative Consumer 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



We thank Cesar Alonso, Carmen Beviá, Luis Cabral, Rosario Crino, Manuel Domínguez, Natalia Fabra, Philippe Gaignepain, Miguel Gonzalez-Maestre, Paco Marhuenda, Pierre von Mouche, Philipp Schmidt-Dengler, José María Sastre, Galina Zudenkova, an anonymous referee and participants in seminars at U. Carlos III, U. Complutense, Madrid, IEB U. of Barcelona, the 2011 EARIE meeting and the Jornadas de Economia Industrial 2011 for very helpful comments, Diego Rodríguez for programming support and María Hernández for research assistance. The first author acknowledges financial support from ECO2011-25330. The second author acknowledges financial support from ECO2010-19847.


  1. Behrens K, Murata Y (2007) General equilibrium models of monopolistic competition: a new approach. J Econ Theory 136:776–787CrossRefGoogle Scholar
  2. Bresnahan TF (1989) Empirical studies of industries with market power. In: Schmalensee R, Willig RD (eds) Handbook of industrial organization. North-Holland, New YorkGoogle Scholar
  3. Corchón L (1994) Comparative statics for aggregative games: the strong concavity case. Math Soc Sci 28:151–165CrossRefGoogle Scholar
  4. Corchón L, Moreno L (2010) Interpreting markups in Spanish manufacturing: the exponential model. Available at SSRN:
  5. De Loecker J, Warzynski F (2009) Markups and firm-level export status. NBER working papers, 15198Google Scholar
  6. Feenstra R, Kee HL (2008) Export variety and country productivity: estimating the monopolistic competition model with endogenous productivity. J Int Econ 74:500–518CrossRefGoogle Scholar
  7. Friedman JW (1977) Oligopoly and the theory of games. Amsterdam: North HollandGoogle Scholar
  8. Kolm SC (1976a) Unequal inequalities I. J Econ Theory 12:416–442CrossRefGoogle Scholar
  9. Kolm SC (1976b) Unequal inequalities II. J Econ Theory 13:82–111CrossRefGoogle Scholar
  10. Konings J, Vandenbussche H (2005) Antidumping protection and markups of domestic firms. J Int Econ 65:151–165CrossRefGoogle Scholar
  11. Konings J, Van Cayseele P, Warzybski F (2005) The effects of privatization and competitive pressure on firms’ price-cost margins: micro evidence for emerging economies. Rev Econ Stat 87(1):124–134CrossRefGoogle Scholar
  12. Lucas R (1985) Models of business cycles. Yrjo Jahnsson lectures. Oxford, Basil BlackwellGoogle Scholar
  13. Melitz M, Ottaviano G (2008) Market size, trade, and productivity. Rev Econ Stud 75:295–316 (2008)CrossRefGoogle Scholar
  14. Miravete E, Röller L-H (2004) Estimating price-cost markups under nonlinear pricing competition. J Eur Econ Assoc 2(2/3):526–535CrossRefGoogle Scholar
  15. Moreno L, Rodríguez D (2010) Export activity, persistence and markups. Appl Econ 42:475–488CrossRefGoogle Scholar
  16. Moreno L, Rodríguez D (2011) Markups, bargaining power and offshoring: an empirical assessment. World Econ 34(9):1593–1627CrossRefGoogle Scholar
  17. Pollak R (1971) Additive utility functions and linear engel curves. Rev Econ Stud 38(116):401–414CrossRefGoogle Scholar
  18. Pratt JW (1964) Risk aversion in the small and the large. Econometrica 32(1–2):122–136CrossRefGoogle Scholar
  19. Roeger W (1995) Can imperfect competition explain the difference between primal and dual productivity measures? Estimates for U.S. Manufacturing J Pol Econ 103(2):316–330CrossRefGoogle Scholar
  20. Sutton J (1991) Sunk costs and market structure. MIT, LondonGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Universidad Carlos IIIMadridSpain

Personalised recommendations