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IRLE is an interdisciplinary institute at the University of California, Berkeley that connects world-class research with policy to improve workers’ lives, communities, and society.
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Collinearity in Linear Structural Models of Market Power
December 1, 2001 • Working Papers • By Edward Z. Shen and Jeffrey Perloff
Abstract The well-known structural model used to estimate market structure suffers from a severe collinearity problem if the marginal cost and demand equations are linear.
