121 empirical oligopoly lecture

121 empirical oligopoly lecture - Empirical Study of...

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Empirical Study of Oligopoly Economics 121 Fall 2007 Joseph Farrell
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The Question(s) • What is it about an industry that is related to good performance? – Things we might use in policy, or – Just scientific investigation • In particular, is it true that “concentration” and/or few firms correlate with poor performance?
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Measuring performance • Total value or consumer value • Price or quantity – Quality effects: want to count – Shifts of the demand curve: want to discount • Level or change • How can one compare anything across industries?
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Cross-industry studies • To compare performance of banking industry versus auto industry… • Tempting to compare price “adjusted for” cost – Huge error if big part of “performance” is getting costs down! – Otherwise, look at margins (direct welfare link) and/or profits
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Looking at Profits • CP chapter 8 hammer on the message that this is a bad approach – Big errors in measuring “economic profits” – Especially long-run profits
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121 empirical oligopoly lecture - Empirical Study of...

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