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The Panzar-Rosse Statistic Revisited
Faculty of Economics, Daito Bunka University, Tokyo, Japan
Faculty of Economics and Management, East China Normal University, Shanghai, China
- 1 Faculty of Economics, Daito Bunka University, Tokyo, Japan
- 2 Faculty of Economics and Management, East China Normal University, Shanghai, China
Theoretical Economics Letters·Volume 07 (2016)·Pages 30–34·Published 13 December 2016·DOI10.4236/tel.2017.71004
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Abstract
In this note, we prove that even if the technology of firms exhibits increasing returns to scale, the Panzar-Rosse statistic in a monopolistic competitive market is still available and has a negative value. Further, we show that the statistic would be greater than unity if firms with increasing-returns-to-scale technology were to choose a saddle point under certain conditions. This implies that the value of greater than unity is not actually observed.
KeywordsPanzar-Rosse StatisticMonopolistic CompetitionIncreasing Returns to Scale
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