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Measuring Monopoly Power, Revisited

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  • Clement G. Krouse

Abstract

The accuracy of monopoly power measures derived from case study econometric models has been questioned recently by Hyde and Perloff (1995) and Boyer (1996). Using the standard industry-form of that model, Hyde and Perloff show that the parameter estimates associated with monopoly power are highly sensitive to mis-specifications of the demand and supply functional forms. Boyer's criticism is made in principle: he reproves the model for generally failing to. ''... capture the diversity and complexity of oligopoly ... '' in respect to entry, product differentiation, fixity of capital, capital adjustment costs, dynamic demand linkages, and variations in monopoly power over time and in the cross-section of firms. While these several criticisms might appear to point at inherent weaknesses in the case study econometric approach, it is here argued that the problem lies in the usual empirical practice.

Suggested Citation

  • Clement G. Krouse, 1998. "Measuring Monopoly Power, Revisited," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(6), pages 687-696, December.
    • Handle: RePEc:kap:revind:v:13:y:1998:i:6:p:687-696
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    Cited by:

    1. Henry Nieuwenhuijsen & Gerrit de Wit & Frank Hindriks, 2000. "Comparative advantages in estimating markups," Scales Research Reports H200003, EIM Business and Policy Research.
    2. Craig A. Gallet, 2003. "Advertising and Restrictions in the Cigarette Industry: Evidence of State‐by‐State Variation," Contemporary Economic Policy, Western Economic Association International, vol. 21(3), pages 338-348, July.

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