Investigating the influence of firm characteristics on the ability to exercise market power : a stochastic frontier analysis approach with an application to the iron ore market


Germeshausen, Robert ; Panke, Timo ; Wetzel, Heike


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URL: https://ub-madoc.bib.uni-mannheim.de/37423
URN: urn:nbn:de:bsz:180-madoc-374237
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: ZEW Discussion Papers
Volume: 14-105
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D22 , L11 , L72,
Keywords (English): Estimation of market power , Lerner indices , stochastic frontier analysis, non-renewable resources
Abstract: This paper empirically analyzes the existence of market power in the global iron ore market during the period 1993-2012 using an innovative Stochastic Frontier Analysis approach introduced by Kumbhakar et al. (2012). In contrast to traditional econometric procedures, this approach allows for the estimation of firm- and time-specific Lerner indices and, therefore, the assessment of the influence of individual firm characteristics on the ability to generate markups. We find that markups on average amount to 20%. Moreover, location and experience are identified to be the most important determinants of the magnitude of firm-specific markups.

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Germeshausen, Robert ; Panke, Timo ; Wetzel, Heike (2014) Investigating the influence of firm characteristics on the ability to exercise market power : a stochastic frontier analysis approach with an application to the iron ore market. Open Access ZEW Discussion Papers Mannheim 14-105 [Working paper]
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