A New Way to Measure Competition

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Abstract

This paper introduces a new way to measure competition based on firms' profits.Within a general model, we derive conditions under which this measure is monotone in competition, where competition can be intensified both through a fall in entry barriers and through more aggressive interaction between players. The measure is shown to be more robust theoretically than the price cost margin. This allows for an empirical test of the problems associated with the price cost margin as a measure of competition.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages35
Volume2004-31
Publication statusPublished - 2004

Publication series

NameCentER Discussion Paper
Volume2004-31

Keywords

  • competition
  • measurement
  • profit
  • firms

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  • Cite this

    Boone, J. (2004). A New Way to Measure Competition. (CentER Discussion Paper; Vol. 2004-31). Macroeconomics.