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Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium
Bikker, Jacob A. Shaffer, Sherrill Spierdijk, Laura
Bikker, Jacob A.
Shaffer, Sherrill
Spierdijk, Laura
Abstract
Description
The Panzar-Rosse test has been widely applied to assess competitive conduct, often in specifications controlling for firm scale or using a price equation. We show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct. Moreover, even an unscaled revenue function generally requires additional information about costs and market equilibrium to infer the degree of competition. Our theoretical findings are confirmed by an empirical analysis of competition in banking, using a sample containing more than 100,000 bank-year observations on more than 17,000 banks in 63 countries during the years 1994 to 2004.
Date
2012-11-01
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Publisher
University of Wyoming. Libraries
Research Projects
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Keywords
DRIVES BANK COMPETITION; EUROPEAN BANKING; MARKET-STRUCTURE; INTERNATIONAL EVIDENCE; CIGARETTE INDUSTRY; POWER; EFFICIENCY; MONOPOLY; CONDUCT; GROWTH,Business