Abstract
The Panzar-Rosse test has been widely applied to assess competitive conduct,
often in specifcations controlling for firm scale or using a price equation. We show
that neither a price equation nor a scaled revenue function yields a valid measure
for competitive conduct. Moreover, even an unscaled revenue function generally
requires additional information about costs and market equilibrium. Our theoretical
findings are confirmed by an empirical analysis of competition in banking, using a
sample covering more than 110,000 bank-year observations on almost 18,000
banks in 67 countries during 1986-2004.
often in specifcations controlling for firm scale or using a price equation. We show
that neither a price equation nor a scaled revenue function yields a valid measure
for competitive conduct. Moreover, even an unscaled revenue function generally
requires additional information about costs and market equilibrium. Our theoretical
findings are confirmed by an empirical analysis of competition in banking, using a
sample covering more than 110,000 bank-year observations on almost 18,000
banks in 67 countries during 1986-2004.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 39 |
| Publication status | Published - 2009 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 27 |
| Volume | 09 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- Panzar-Rosse test
- competition
- firm size