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Resolving the Conflict on Conduct Parameter Estimation in Homogeneous Goods Markets between Bresnahan (1982) and Perloff and Shen (2012)

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  • Yuri Matsumura
  • Suguru Otani

Abstract

We revisit conduct parameter estimation in homogeneous goods markets to resolve the conflict between Bresnahan (1982) and Perloff and Shen (2012) regarding the identification and the estimation of conduct parameters. We point out that Perloff and Shen's (2012) proof is incorrect and its simulation setting is invalid. Our simulation shows that estimation becomes accurate when demand shifters are properly added in supply estimation and sample sizes are increased, supporting Bresnahan (1982).

Suggested Citation

  • Yuri Matsumura & Suguru Otani, 2023. "Resolving the Conflict on Conduct Parameter Estimation in Homogeneous Goods Markets between Bresnahan (1982) and Perloff and Shen (2012)," Papers 2301.06665, arXiv.org, revised May 2023.
    • Handle: RePEc:arx:papers:2301.06665
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    1. Perloff, Jeffrey M. & Shen, Edward Z., 2001. "Collinearity in Linear Structural Models of Market Power," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6js7c38h, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
    3. Jeffrey Perloff & Edward Shen, 2012. "Collinearity in Linear Structural Models of Market Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(2), pages 131-138, March.
    4. Tetsuji Okazaki & Ken Onishi & Naoki Wakamori, 2022. "Excess Capacity And Effectiveness Of Policy Interventions: Evidence From The Cement Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 883-915, May.
    5. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
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