Resolving the Conflict on Conduct Parameter Estimation in Homogeneous Goods Markets between Bresnahan (1982) and Perloff and Shen (2012)
We revisit conduct parameter estimation in homogeneous goods markets to resolve the conflict between Bresnahan (1982) and Perloff and Shen (2012) regarding the identification and the accuracy of conduct parameter estimation. We point out that the proof of Perloff and Shen (2012) is incorrect and its simulation setting is not valid. Our simulation shows that the estimation becomes accurate when properly adding demand shifters in the supply estimation and increasing the sample size. Therefore, we support Bresnahan (1982)