The empirical assessment of market power using structural models is widely used in the New Empirical Industrial Organisation (NEIO) literature. The basic approach depends crucially on estimated market level demand, and cost specifications after taking into account specific strategic objectives of firms. Most empirical studies of market power use ad hoc demand specifications, which do not satisfy all the restrictions of consumer theory. The estimated market power parameters may imply violation of the basic tenets of economic rationality. In this paper, a well-behaved utility function is used to specify the flexible Linear Approximate Almost Ideal Demand System (LAIDS). LAIDS allows the imposition of theoretical restrictions to simultaneously estimate; demand functions, marginal cost functions and market power parameters for fresh salmon products in the UK retail market. This method of estimating market power in several markets at once permits the examination of shock in one market and the effect on market power in another market. This provides a significantly better understanding of the salmon industry's pricing behavior.
|Title of host publication||What are responsible fisheries?: proceedings of the twelfth biennial conference of the international institute of fisheries economics and trade|
|Editors||Y. Matsuda, T. Yamamoto|
|Place of Publication||Corvallis, Oregon, USA|
|Publisher||The International Institute of Fisheries Economics & Trade|
|Publication status||Published - 27 Jul 2004|