A Note on the Estimation of Markup Pricing in Manufacturing

Earlier results on estimating markup ratios as indicators of the competitive pressure are discussed and it is shown that the estimation method suggested by Roeger (1995) suffers from similar problems as an earlier method suggested by Hall (1988). It is also shown that the estimating equations applied are prone to autocorrelation and heteroskedasticity and that a proper treatment of these problems implies estimates of the markup ratios or more precisely the relation between the markup and the scale factor, which are smaller than those reported in the literature.Competition; markup ratios; returns to scale; estimation