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Nonparametric Tests of Profit Maximization in Oligopoly with Application to the Beef Packing Industry
Author(s) -
Driscoll Paul J.,
Kambhampaty S. Murthy,
Purcell Wayne D.
Publication year - 1997
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1244428
Subject(s) - nonparametric statistics , profit maximization , oligopoly , econometrics , profit (economics) , economics , maximization , microeconomics , industrial organization , cournot competition
Abstract In this paper, we develop new, nonparametric methods of testing for static profit maximization given noncompetitive behavior. Repeated application of the test yields “maximum likelihood” estimates of the degree of noncompetitive behavior. Using plant‐level data, these newly developed nonparametric methods are employed to test the hypothesis that beef packers are profit maximizers and to measure the extent to which packers influence prices in fed‐cattle markets.