Measuring market conduct in the Brazilian cement industry: a dynamic econometric investigation

Abstract

Indirect assessments of market conduct have become widespread in the New Empirical Industrial Organization-NEIO literature. Recently, Steen and Salvanes (1999, Int J Ind Organ 17:147-177) provided a flexible dynamic econometric formulation of the approach advanced by Bresnahan (1982, Econ Lett 19:87-92) and Lau (1982, Econ Lett 10:93-99). The present paper considers a similar approach applied to regional cement markets in Brazil under more favorable data availability, and attempts to address part of the concerns that usually emerge with respect to the NEIO literature. In particular, issues pertaining to structural stability and the control for the number of competing firms are addressed. The evidence clearly indicates non-negligible and distinct market power in different regions and also distinct conduct patterns in the short and long run.