search query: @indexterm ENDOGENOUS VARIABLES / total: 33
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| Author: | Neven, D. Röller, L-H. Zhang, Z. |
| Title: | Endogenous costs and price-cost margins: an application to the European airline industry |
| Journal: | Journal of Industrial Economics
2006 : SEP, VOL. 54:3, p. 351-368 |
| Index terms: | airlines costs endogenous variables marginal-cost pricing Europe |
| Language: | eng |
| Abstract: | The study allows for endogenous costs in the estimation of price cost margins. Particularly, price-cost margins are estimated when companies bargain over wages. The standard two-equation set-up (demand and first-order condition in the product market) is extended to include a third equation, which is derived from bargaining over wages. In this way, price-cost margins are determined by wages and vice versa. The model is implemented using data for eight European airlines from 1976-1994, and it is shown that the treatment of endogenous costs has important implications for the measurement of price-cost margins and the assessment of market power. |
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