(Word limit: 1200 words) Imagine that your research question requires you to analyse the extent...

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(Word limit: 1200 words) Imagine that your research question requires you to analyse the extent to which market structure causes supernormal profits and inhibits competition. Explore the data set...

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(Word limit: 1200 words)

Imagine that your research question requires you to analyse the extent to which market structure causes supernormal profits and inhibits competition.

Explore the data set SCP_TMA05_2012.gdt, and then use the data set to do the following. Please use GRETL or other statistic software to open this file.

a. Produce some preliminary descriptive statistics on the variables of interest. Analyse the main features of the distribution of each variable and of the relations between them.

b. Based on the results in part (a), explain how you would specify the variables in the econometric model that analyses the impact of market structure on performance.

c. Discuss how you would estimate the model proposed in part (b). In particular, describe the estimation method that is most suitable for the dependent variable you have in the model.

d. Estimate your model and analyse your results. Explain whether there is the need to correct for heteroskedasticity or to revise the model specification in light of these results.

e. Evaluate the appropriateness of the analysis and strength of your results in answering the question.

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Answered Same Day Dec 20, 2021

Robert · Accepted Answer

(Word limit: 1200 words) Imagine that your research question requires you to analyse the extent to which market structure causes supernormal profits and inhibits competition. Explore the data set SCP_TMA05_2012.gdt, and then use the data set to do the following. Please use GRETL or other statistic software to open this file. 
The below are the variables in the attached datasets.
Variables: 
sic: Industry code: UK Standard Industrial Classification
year: Year
sales Industry sales (gross output, Million GBP)
pcm1: Price-cost margin 1 (Net output - operatives wage bill) / net output
pcm2: Price-cost margin 2 (Net output - operatives wage bill) / gross output
grow: Rate of growth of industry sales (difference between logs of sales in two consecutive years)
adint: Ratio of 'cost of non-industrial services' to gross output (includes advertising and legal costs)*
conc: 5-firm concentration ratio (aggregate market share of the largest five firms in an industry)
             sic  Industry code - Standard Industrial Classification
            year  Year of survey (1982)
           sales  Industry sales (Million GBP)
            pcm1  Price-cost margin 1  (Net output - operatives wage bill) / net output
            pcm2  Price-cost margin 2  (Net output - operatives wage bill) / gross output
            grow  Rate of growth of industry sales
           adint  Advertising intensity: Ratio of 'cost of non-industrial services' to gross output (includes advertising and legal costs)
            conc  5-firm concentration ratio
a. Produce some preliminary descriptive statistics on the variables of interest. Analyse the main features of the distribution of each variable and of the relations between them. 
Solution:
Summary statistics, using the observations 1 – 95 for the variable 'grow' (95 valid observations)
  Mean                      0.063357
  Median                    0.052423
  Minimum                   -0.10515
  Maximum                    0.36852
  Standard deviation        0.078819
  C.V.                        1.2440
  Skewness                    1.0121
  Ex. kurtosis                2.1483
Summary statistics, using the observations 1 – 95 for the variable 'pcm1' (95 valid observations)
  Mean                       0.68957
  Median                     0.67649
  Minimum                    0.49174
  Maximum                    0.90708
  Standard deviation         0.10387
  C.V.                       0.15063
  Skewness                   0.16724
  Ex. kurtosis              -0.88856
We can see from the above results that mean and median are close to each other. 
b. Based on the results in part (a),

(Word limit: 1200 words) Imagine that your research question requires you to analyse the extent to which market structure causes supernormal profits and inhibits competition. Explore the data set...

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