AgEcon Search

AgEcon Search >
       Agricultural and Applied Economics Association (formerly the American Agricultural Economics Association) >
          2013 Annual Meeting, August 4-6, 2013, Washington, D.C. >

Please use this identifier to cite or link to this item: http://purl.umn.edu/149830

Title: ON ENDOGENEITY OF RETAIL MARKET POWER IN AN EQUILIBRIUM ANALYSIS: A CONTROL FUNCTION APPROACH
Authors: Hovhannisyan, Vardges
Stiegert, Kyle W.
Bozic, Marin
Authors (Email): Hovhannisyan, Vardges (vhovhann@umn.edu)
Stiegert, Kyle W. (kwstiegert@wisc.edu)
Bozic, Marin (mbozic@umn.edu)
Keywords: Market power endogeneity
control function
conjectural variation
retail conduct
benet function
JEL Codes: D22
L13
Issue Date: 2013
Abstract: The endogeneity of retail market power arises in the retail pricing equation due to the correlation between margins and unobserved cost components. Nevertheless, it has long been ignored in the equilibrium analysis of retail behavior. We address the issue via a control function approach in a new conceptual framework with consumer preferences represented by a benefit function. We further offer three test procedures to evaluate the endogeneity of retail market power. The empirical value of the model is illustrated in an application to the US yogurt industry. Outcomes from endogeneity tests provide strong evidence for market power endogeneity. Moreover, ignoring the issue results in downward bias in retail market power.
URI: http://purl.umn.edu/149830
Institution/Association: Agricultural and Applied Economics Association>2013 Annual Meeting, August 4-6, 2013, Washington, D.C.
Total Pages: 34
Collections:2013 Annual Meeting, August 4-6, 2013, Washington, D.C.

Files in This Item:

File Description SizeFormat
Control_Function.pdfMain paper304KbPDFView/Open
Recommend this item

All items in AgEcon Search are protected by copyright.

 

 

Brought to you by the University of Minnesota Department of Applied Economics and the University of Minnesota Libraries with cooperation from the Agricultural and Applied Economics Association.

All papers are in Acrobat (.pdf) format. Get Adobe Reader

Contact Us

Powered by: