Estimating Market Power Evidence from the Us Brewing Industry

37 Pages Posted: 19 Dec 2016 Last revised: 25 Mar 2023

See all articles by Jan De Loecker

Jan De Loecker

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Paul Scott

New York University

Multiple version iconThere are 2 versions of this paper

Date Written: December 2016

Abstract

While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.

Suggested Citation

De Loecker, Jan and Scott, Paul, Estimating Market Power Evidence from the Us Brewing Industry (December 2016). NBER Working Paper No. w22957, Available at SSRN: https://ssrn.com/abstract=2887240

Jan De Loecker (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://pages.stern.nyu.edu/~jdeloeck/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Paul Scott

New York University ( email )

New York
United States

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