The estimation of the degree of oligopoly power

Abstract

This paper extends the use of econometric production theory techniques to ageneral class of oligopolistic markets. We provide a framework which enables us to estimate the conjectural variation and test various hypotheses about non-competitive behavior. Furthermore, we provide a measure of the degree of oligopolistic power of a firm and a degree of oligopoly index for the whole industry that can be used to test for the underlying structure of the industry. As an example we provide an application to the U.S. rubber, textile, electrical machinery and tobacco industries and find the first two to be characterized by competitive behavior and the last two by oligopolistic behavior.