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A statistical test of single firm market power

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  • Michael Pickford
  • Stephen Haslett

Abstract

A market structure-performance model is used to search for a structural break in the leading firm market share-profitability relationship. The model, incorporating both market power and efficiency variables to account for variations in price-cost margins, is tested using cross-section 1978/79 Census data for New Zealand manufacturing industries. A novel computational approach using backward and forward cusum and cusum of squared tests based on recursive residuals is used. A statistically significant breakpoint at a top firm market share of 16-17 per cent is found, with the model being much stronger for the sub-set of data above that point.

Suggested Citation

  • Michael Pickford & Stephen Haslett, 1999. "A statistical test of single firm market power," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(2), pages 39-58.
    • Handle: RePEc:taf:nzecpp:v:33:y:1999:i:2:p:39-58
    DOI: 10.1080/00779959909544307
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    Cited by:

    1. Ahmed Bani-Mustafa & K. M. Matawie & C. F. Finch & Amjad Al-Nasser & Enrico Ciavolino, 2019. "Recursive residuals for linear mixed models," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(3), pages 1263-1274, May.

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