Nonparametric Tests of Profit Maximization in Oligopoly with Application to the Beef Packing Industry
1997
Driscoll, Paul J. | Kambhampaty, S Murthy | Purcell, Wayne D.
In this paper, we develop new, nonparametric methods of testing for static profit maximization given noncompetitive behavior. Repeated application of the test yields “maximum likelihood” estimates of the degree of noncompetitive behavior. Using plant‐level data, these newly developed nonparametric methods are employed to test the hypothesis that beef packers are profit maximizers and to measure the extent to which packers influence prices in fed‐cattle markets.
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