Estimating the Conjectural Variation and Market Power in Selected Industries

Abstract

In recent studies, many economists have focused on the industry and market. In order to provide a comprehensive framework for target market, Policymakers need to have information about the structure of the market and the factors affecting it. The model which is presented in this research shows the behavior of selected industries. This model investigates the structure from competition to monopoly and makes a link between the consumer and the producer behavior. In this paper ten manufacturing industries in Iran at 4-degree ISIC are chosen and market power and conjectural elasticity (CV) is examined using panel data from 1996 to 2007.The results show that the estimated CV differs significantly from -1 for most of the industries surveyed but two cases, cement and beverage industries with -0.27 and 0.5 respectively. On a scale of -1(no collusion) to ((1⁄H)-1) (full collusion), these industries seem to have competitive behavior. Further, the effects of concentration on both market power and cost efficiency on price is estimated