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Abstract

This paper sets up hypotheses tests for the exertion of market power by government trade agencies. The principle of profit maximization is used to derive an equilibrium condition for noncompetitive markets and provide explicit parametric tests for the level of market power exerted. This study differs from previous works in that exertion of market power is revealed through econometric techniques as opposed to the prevailing practice of comparing simulation outcomes to actual data. The Japanese role in wheat trade is selected as an application of the method.

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