Monopoly Power in Iranian Rubber and Plastics Industries: A Comparative

The main purposes of this article are the evaluation of competition and comparison of market power in rubber and plastics industries with two non-structural approaches. To meet this ends Bresnehan-Lau (1982) and Panzar-Ross (1987) models were used. Data in 4-digit industries for rubber and plastics sub-sectors over the period of 1995-2011 collected from Iran’s statistical center. Equations used in this study consist of supply-demand and reduced form revenue functions estimated with two stage least squares fixed effect (FE2SLS) and least square dummy variables (LSDV) methods respectively. Results indicated that the extent of conjectural variation coefficient was about θ=0.82 because of the fact that firms cooperate with each other, therefore there was imperfect competition structure in this sector. On the other hand, the sum of elasticity’s reduced form revenue with respect to input price was about H=0.81, so market structure was featured as a monopolistic competition. In addition, Comparative results of two approaches confirmed depletion of competition in Iranian rubber and plastics industries.