NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Estimating market power Evidence from the US Brewing Industry

Jan De Loecker, Paul T. Scott

NBER Working Paper No. 22957
Issued in December 2016
NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22957

Users who downloaded this paper also downloaded* these:
Garcia-Macia, Hsieh, and Klenow w22953 How Destructive is Innovation?
De Loecker and Van Biesebroeck w21994 Effect of International Competition on Firm Productivity and Market Power
Helpman w22944 Globalization and Wage Inequality
Murphy and Palacios-Huerta w22994 A Theory of Bundling Advertisements in Media Markets
Collard-Wexler and De Loecker w22437 Production Function Estimation with Measurement Error in Inputs
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us