Cookies?
Library Header Image
LSE Research Online LSE Library Services

Inferring conduct under the threat of entry: the case of the Brazilian cement industry

Salvo, Alberto (2004) Inferring conduct under the threat of entry: the case of the Brazilian cement industry. EI, 38. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

[img]
Preview
PDF
Download (1MB) | Preview
Identification Number: 38

Abstract

This paper demonstrates that when an industry faces potential entry and this threat of entry constrains pre-entry prices, cost and conduct are not identified from the comparative statics of equilibrium. In such a setting, the identifying assumption behind the well-established technique of relying on exogenous demand perturbations to empirically distinguish between alternative hypotheses of conduct is shown to fail. The Brazilian cement industry, where the threat of imports restrains market outcomes, provides an empirical illustration. In particular, price-cost margins estimated using this established technique are considerably biased downward, underestimating the degree of market power. A test of conduct is proposed, adapted to this constrained setting, which suggests that outcomes in the industry are collusive and characterised by market division.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2004 Alberto Salvo
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 08 Jul 2008 15:20
Last Modified: 01 Oct 2010 08:58
URI: http://eprints.lse.ac.uk/id/eprint/6728

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics