Testing firm conduct

• 成果类型: Article
• 署名作者: Duarte, Marco; Magnolfi, Lorenzo; Solvsten, Mikkel; Sullivan, Christopher
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of Wisconsin System; University of Wisconsin Madison; Aarhus University
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE2319
• 发表日期: 2024
• 页码: 571-606
• 关键词: inference; misspecification; model selection; Rivers and Vuong test; weak instruments; C52; L21

摘要

Evaluating policy in imperfectly competitive markets requires understanding firm behavior. While researchers test conduct via model selection and assessment, we present the advantages of Rivers and Vuong (2002) (RV) model selection under misspecification. However, degeneracy of RV invalidates inference. With a novel definition of weak instruments for testing, we connect degeneracy to instrument strength, derive weak instrument properties of RV, and provide a diagnostic for weak instruments by extending the framework of Stock and Yogo (2005) to model selection. We test vertical conduct (Villas-Boas (2007)) using common instrument sets. Some are weak, providing no power. Strong instruments support manufacturers setting retail prices.