Competition: Theoretical paramaterizations and empirical measures

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45 Citations (Scopus)

Abstract

This paper proposes relative profits (RP) as a robust measure of competition. I consider nine different parameterizations of competition and show that more intense competition increases the profits of a firm relative to a less efficient firm. Further, popular competition measures like the price-cost margin (PCM) and Herfindahl index (H) can either increase or decrease in response to more intense competition. In this sense, RP is a more robust competition measure than PCM and H.
Original languageEnglish
Pages (from-to)587-611
JournalJournal of Institutional and Theoretical Economics
Volume164
Issue number4
Publication statusPublished - 2008

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