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Estimation of competitive conduct when firms are efficiently colluding: addressing the Corts critique

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  • Steven Puller

Abstract

I address a recent critique by Corts (1999) who finds that traditional approaches in New Empirical Industrial Organization to estimate the competitive conduct in an oligopoly market can yield inconsistent estimates of the conduct parameter if firms are engaged in efficient collusion. This article derives a general empirical model that allows consistent estimation of the conduct parameter that is robust to efficient collusion.

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  • Steven Puller, 2009. "Estimation of competitive conduct when firms are efficiently colluding: addressing the Corts critique," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1497-1500.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:15:p:1497-1500
    DOI: 10.1080/13504850701578900
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    Cited by:

    1. Kutlu, Levent & Sickles, Robin & Tsionas, Mike G., 2019. "Heterogeneous Decision-Making and Market Power," Working Papers 19-008, Rice University, Department of Economics.
    2. Carlos Suarez, 2023. "Mixed Oligopoly and Market Power Mitigation: Evidence from the Colombian Wholesale Electricity Market," Journal of Industrial Economics, Wiley Blackwell, vol. 71(2), pages 354-406, June.
    3. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.
    4. Luis Orea & Jevgenijs Steinbuks, 2018. "Estimating Market Power In Homogenous Product Markets Using A Composed Error Model: Application To The California Electricity Market," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1296-1321, April.
    5. Maruyama, Tomoya, 2024. "How competitiveness evolved in the Japanese bank loan market between 1977 and 2020," Japan and the World Economy, Elsevier, vol. 69(C).
    6. Murakami, Hideki & Amano, Yoshihisa & Asahi, Ryota, 2015. "Dynamic effect of inter-firm rivalry on airfares: Case of Japan's full-service and new air carriers," Journal of Air Transport Management, Elsevier, vol. 44, pages 25-33.
    7. Levent Kutlu & Robin C. Sickles & Mike G. Tsionas & Emmanuel Mamatzakis, 2022. "Heterogeneous decision-making and market power: an application to Eurozone banks," Empirical Economics, Springer, vol. 63(6), pages 3061-3092, December.
    8. Robert Germeshausen & Timo Panke & Heike Wetzel, 2020. "Firm characteristics and the ability to exercise market power: empirical evidence from the iron ore market," Empirical Economics, Springer, vol. 58(5), pages 2223-2247, May.
    9. Devin Garcia & Levent Kutlu & Robin C. Sickles, 2022. "Market Structures in Production Economics," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 13, pages 537-574, Springer.
    10. Piedrabuena, Bernardita, 2013. "Competencia en el mercado bancario del crédito en Chile," IDB Publications (Working Papers) 4630, Inter-American Development Bank.
    11. Mustafa U. Karakaplan & Levent Kutlu, 2019. "Estimating market power using a composed error model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 489-510, September.
    12. Shcherbakov, Oleksandr & Wakamori, Naoki, 2015. "A simple way to identify the degree of collusion under proportional reduction," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 497, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Levent Kutlu & Robin C. Sickles, 2017. "Measuring market power when firms price discriminate," Empirical Economics, Springer, vol. 53(1), pages 287-305, August.
    14. Yue Cai, 2021. "Measuring Market Power in the IPO Underwriter," Working Papers 2108, Waseda University, Faculty of Political Science and Economics.
    15. Bhattacharyya, Aditi & Kutlu, Levent & Sickles, Robin C., 2018. "Pricing Inputs and Outputs: Market prices versus shadow prices, market power, and welfare analysis," Working Papers 18-009, Rice University, Department of Economics.
    16. Levent Kutlu & Ran Wang, 2018. "Estimation of cost efficiency without cost data," Journal of Productivity Analysis, Springer, vol. 49(2), pages 137-151, June.
    17. Oleksandr Shcherbakov & Naoki Wakamori, 2017. "Identifying the Degree of Collusion Under Proportional Reduction," Staff Working Papers 17-51, Bank of Canada.
    18. Juan Luis Jiménez & Jordi Perdiguero, 2018. "Mergers and difference-in-difference estimator: Why firms do not increase prices?," European Journal of Law and Economics, Springer, vol. 45(2), pages 285-311, April.
    19. Hideki Murakami, 2012. "Dynamic Effect of Low-Cost Entry on the Conduct Parameter: An Early-Stage Analysis of Southwest Airlines and America West Airlines," Discussion Papers 2012-25, Kobe University, Graduate School of Business Administration.
    20. Ruiz-Moreno, Felipe & Mas-Ruiz, Francisco J. & Sancho-Esper, Franco M., 2021. "Strategic groups and product differentiation: Evidence from the Spanish airline market deregulation," Research in Transportation Economics, Elsevier, vol. 90(C).
    21. Carlos Suarez, 2021. "Mixed Oligopoly and Market Power Mitigation: Evidence from the Colombian Wholesale Electricity Market," IREA Working Papers 202101, University of Barcelona, Research Institute of Applied Economics, revised Jan 2021.
    22. Kutlu, Levent & Sickles, Robin C., 2012. "Estimation of market power in the presence of firm level inefficiencies," Journal of Econometrics, Elsevier, vol. 168(1), pages 141-155.

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