Description:
This chapter describes the econometric studies of market power in single markets and in groups of related markets. The recent increase in the number of such studies and substantial advances in the methods for carrying them out constitute a dramatic shift in the focus of empirical work in the industrial organization (IO) field. The chapter discusses time series data from single industries or on data from closely related markets. The new empirical industrial organization (NEIO) is clearly somewhat different than the previously dominant empirical method in the field, the structureconductperformance paradigm (SCPP). The chapter presents the formation and enforcement of tacitly collusive arrangements, the nature of noncooperative oligopoly interaction in the world, the degree of single-firm market power under product differentiation, and the size and determinants of the industry price-cost margin. It reviews the various empirical models of monopoly power and of oligopoly interaction and describes the theoretical and empirical arguments for why it is monopoly power that is being measured.