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Lower Bound Estimation – Quantile Regression and Simplex Method: An Application to Italian Manufacturing Sectors

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  • Maria Letizia Giorgetti

Abstract

This paper estimates Sutton's lower bound [1991, 1998] by quantile regression, and thus shows the influence of outliers on previous estimates that used the simplex method. The lower bound estimates are obtained separately for exogenous and endogenous sunk cost industries in Italian manufacturing sectors in 1995, using microdata from the SCI’95 (Firms Accounts System) survey conducted by ISTAT (National Institute of Statistics, Italy). The results suggest that Sutton's predictions are robust.

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  • Maria Letizia Giorgetti, 2003. "Lower Bound Estimation – Quantile Regression and Simplex Method: An Application to Italian Manufacturing Sectors," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 113-120, March.
    • Handle: RePEc:bla:jindec:v:51:y:2003:i:1:p:113-120
    DOI: 10.1111/1467-6451.00194
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    1. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
    2. Koenker, Roger, 2000. "Galton, Edgeworth, Frisch, and prospects for quantile regression in econometrics," Journal of Econometrics, Elsevier, vol. 95(2), pages 347-374, April.
    3. Davies, Stephen & Lyons, Bruce, 1996. "Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism," OUP Catalogue, Oxford University Press, number 9780198289739.
    4. Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
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    Cited by:

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    2. Burghardt, Dirk, 2013. "The Impact of Trade Policy on Industry Concentration in Switzerland," Economics Working Paper Series 1317, University of St. Gallen, School of Economics and Political Science.
    3. Marcelo Resende, 2009. "Concentration and market size: lower bound estimates for the Brazilian industry," Economics Bulletin, AccessEcon, vol. 29(3), pages 2465-2471.
    4. GIANNETTI, Caterina, 2007. "Intensity of competition and market structure in the Italian banking industry," LIDAM Discussion Papers CORE 2007041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. F. Lotti & E. Santarelli & M. Vivarelli, 2003. "Gibrat's Law and Market Selection in the Radio, TV & Telecommunications Equipment Industry," Working Papers 478, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Roman, Hernan, 2010. "Testing for Endogenous Sunk Costs in the Retail Industry," MPRA Paper 67250, University Library of Munich, Germany, revised 2014.
    7. Benjamin C. Anderson & Ian M. Sheldon, 2024. "R&D Concentration in Soybean and Cotton Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(1), pages 93-115, February.

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