Measuring Competition Using the Profit Elasticity: American Sugar Industry, 1890-1914

14 Pages Posted: 27 Dec 2010  

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; TILEC

Michiel van Leuvensteijn

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Date Written: December 2010

Abstract

The Profit Elasticity (PE) is a new competition measure introduced in Boone (2008). So far, 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 war regime and break-up of cartel regime.

Keywords: competition, measures of competition, price cost margin, profit elasticity

JEL Classification: D43, L13

Suggested Citation

Boone, Jan and van Leuvensteijn, Michiel, Measuring Competition Using the Profit Elasticity: American Sugar Industry, 1890-1914 (December 2010). CEPR Discussion Paper No. DP8159. Available at SSRN: https://ssrn.com/abstract=1729577

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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