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Discussion Paper Details

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Title: A New Way to Measure Competition

Author(s): Jan Boone

Publication Date: March 2004

Keyword(s): competition, measures of competition, price cost margin and variable profits

Programme Area(s): Industrial Organization

Abstract: This Paper introduces a new way to measure competition based on firms' profits. Within a general model, we derive conditions under which this measure is monotone in competition, where competition can be intensified both through a fall in entry barriers and through more aggressive interaction between players. The measure is shown to be theoretically more robust than the price cost margin. This allows for an empirical test of the problems associated with the price cost margin as a measure of competition.

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Bibliographic Reference

Boone, J. 2004. 'A New Way to Measure Competition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4330