Market Power, Production (Mis)Allocation and OPEC

54 Pages Posted: 11 Sep 2017 Last revised: 14 Jul 2024

See all articles by John Asker

John Asker

UCLA

Allan Collard-Wexler

Duke University

Jan De Loecker

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2017

Abstract

This paper estimates the extent to which market power is a source of production misallocation. Productive inefficiency occurs through more production being allocated to higher-cost units of production, and less production to lower-cost production units, conditional on a fixed aggregate quantity. We rely on rich micro-data covering the global market for crude oil, from 1970 to 2014, to quantify the extent of productive misallocation attributable to market power exerted by the OPEC. We find substantial productive inefficiency attributable to market power, ranging from 14.1 percent to 21.9 percent of the total productive inefficiency, or 105 to 163 billion USD.

Suggested Citation

Asker, John William and Collard-Wexler, Allan and De Loecker, Jan, Market Power, Production (Mis)Allocation and OPEC (September 2017). NBER Working Paper No. w23801, Available at SSRN: https://ssrn.com/abstract=3035146

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
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United States

Allan Collard-Wexler

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
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Jan De Loecker

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://pages.stern.nyu.edu/~jdeloeck/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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