- Competition: theoretical parameterizations and empirical measures
- Journal of Institutional and Theoretical Economics
- Volume | Issue number
- 164 | 4
- Pages (from-to)
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
- This paper proposes relative profits (RP) as a robust measure of competition. I consider nine different parameterizations
of competition and show that more intense competition increases the profits of a firm relative to a less efficient firm. Further,
popular competition measures like the price-cost margin (PCM) and Herfindahl index (H) can either increase or decrease in
response to more intense competition. In this sense, RP is a more robust competition measure than PCM and H.
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