Measuring Competition Using the Profit Elasticity: American Sugar Industry, 1890-1914
CentER Discussion Paper Series No. 2010-124
13 Pages Posted: 8 Dec 2010 Last revised: 16 Dec 2010
Date Written: December 7, 2010
The Profit Elasticity (PE) is a new competition measure introduced in Boone (2008). Sofar, there was no direct proof that this measure can identify regimes of competition empirically. This paper focuses on this issue using data of Genesove and Mullin (1998) in which different regimes of competition are identified. We derive a version of PE Suitable for this data set. This competition measure correctly classifies the monopoly/cartel regime as being less competitive than both the price ware regime and break-up of cartel regime.
Keywords: competition, measures of competition, price cost margin, profit elasticity
JEL Classification: D43, L13
Suggested Citation: Suggested Citation