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| Author: | Kim, D-W. Knittel, C.R. |
| Title: | Biases in static oligopoly models? Evidence from the California electricity market |
| Journal: | Journal of Industrial Economics
2006 : DEC, VOL. 54:4, p. 451-470 |
| Index terms: | electricity industry marginal costing oligopoly |
| Language: | eng |
| Abstract: | A lack of reliable marginal cost data often makes estimation of market power complicated. Numerous empirical studies identify industry competition and marginal costs levels by estimating the company's first order condition within a conjectural variations framework. Some studies, however, have analyzed the accuracy of this technique. This article uses direct measures of marginal cost for the California electricity market to measure the extent to which estimated mark-ups and marginal costs are biased. The findings suggest that the technique poorly estimates mark-ups and the sensitivity of marginal cost to cost shifters. |
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