This paper develops an empirical model of short-run pricing behavior for firms in a homogeneous product oligopoly. It is based on the variable profit function and related output supply and factor demand equations and is used to analyze the behavior of firms in the coffee roasting industry. A parametric test of the dominant firm model is developed and applied. The hypothesis of dominant firm behavior and Cournot behavior are rejected. The hypothesis of price-taking behavior is rejected for the largest two firms in the industry but is not rejected for all other firms. Using the estimated pattern of firm behavior, an index of overall industry performance is constructed.
All Science Journal Classification (ASJC) codes
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management
- Industrial and Manufacturing Engineering