Skip to main content
SpringerLink
Log in

Pricing Inputs and Outputs: Market Prices Versus Shadow Prices, Market Power, and Welfare Analysis

  • Chapter
  • First Online:
The Palgrave Handbook of Economic Performance Analysis

Abstract

Our chapter surveys the literature on why market prices may provide distorted signals, i.e., diverge from socially efficient prices. There are a number of reasons for this to occur, such as price controls, externalities, imperfect competition, taxes, trade controls, etc. Broadly, market failure may occur due to the structure (characteristics) of the market or due to government intervention. In the presence of market failures, it would be sensible to identify the shadow value (efficient value) of relevant outputs or inputs. To this end, it is essential to understand the relationship between market prices and shadow prices. We begin in a setting wherein no distortions exist, and thus, market prices and shadow prices coincide. We then broaden our analysis to the cases in which market prices and shadow prices diverge, for the reasons we have given above. We also summarize some of the widely used methods to value non-market goods, services, or bad outputs, such as pollution, as well as approaches for projects that can accommodate not only allocative efficiency but also provide insights into their impact on the growth and redistribution of income.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 189.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 249.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 249.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    For details of advancements in the price discrimination literature, see Armstrong (2006) and Stole (2007).

References

  • Adamowicz, W.L. 1994. Habit formation and variety seeking in a discrete choice model of recreation demand. Journal of Agricultural and Resource Economics 19: 19–31.

    Google Scholar 

  • Aiken, D.V. 2006. Application of the distance function to nonmarket valuation of environmental goods and services: An illustrative example. Ecological Economics 60: 168–175.

    Article  Google Scholar 

  • Aiken, D.V., and C.A. Pasurka Jr. 2003. Adjusting the measurement of U.S. manufacturing productivity for air pollution emissions control. Resource and Energy Economics 25: 329–351.

    Article  Google Scholar 

  • Anselin, L., and N. Lozano-Gracia. 2009. Spatial hedonic models. In Palgrave handbook of econometrics: Volume 2, applied econometrics, ed. T. Mills and K. Patterson. Basingstoke: Palgrave Macmillan.

    Google Scholar 

  • Appelbaum, E. 1982. The estimation of the degree of oligopoly power. Journal of Econometrics 19: 287–299.

    Article  Google Scholar 

  • Armstrong, M. 2006. Recent developments in the economics of price discrimination. In Advances in economics and econometrics: Theory and applications, ninth world congress of the econometric society, ed. R. Blundell, W. Newey, and T. Persson. Cambridge, UK: Cambridge University Press.

    Google Scholar 

  • Asian Development Bank. 2013. Cost-benefit analysis for development: A practical guide.

    Google Scholar 

  • Atkinson, S.E., and C. Cornwell. 2011. Estimation of allocative inefficiency and productivity growth with dynamic adjustment costs. Econometric Reviews 30: 337–357.

    Article  Google Scholar 

  • Atkinson, S.E., and R. Halvorsen. 1984. Parametric efficiency tests, economies of scale, and US electric power generation. International Economic Review 25: 647–662.

    Article  Google Scholar 

  • Barbier, E.B. 2007. Valuing ecosystem services as productive inputs. Economic Policy 22: 177–229.

    Article  Google Scholar 

  • Bateman, I.J., and A. Munro. 2009. Household versus individual valuation: What’s the difference? Environmental & Resource Economics 43: 119–135.

    Article  Google Scholar 

  • Berg, S.A., and M. Kim. 1998. Banks as multioutput oligopolies: An empirical evaluation of the retail and corporate banking markets. Journal of Money, Credit and Banking 30: 135–153.

    Article  Google Scholar 

  • Berger, A.N., and T.H. Hannan. 1998. The efficiency cost of market power in the banking industry: A test of the “quiet life” and related hypotheses. Review of Economics and Statistics 80: 454–465.

    Article  Google Scholar 

  • Bergstrom, J.C., J.R. Stoll, and A. Randall. 1990. The impact of information on environmental commodity valuation decisions. American Journal of Agricultural Economics 72: 614–621.

    Article  Google Scholar 

  • Bishop, R.C., and T.A. Heberlein. 1979. Measuring values of extra-market goods: Are indirect measures biased? American Journal of Agricultural Economics 61: 926–930.

    Article  Google Scholar 

  • Bockstael, N.E., and K.E. McConnell. 2007. Environmental and resource valuation with revealed preferences: A theoretical guide to empirical models. In The economics of non-market goods and resources series, vol. 7, ed. I.J. Bateman. Dordrecht, The Netherlands: Springer.

    Google Scholar 

  • Bockstael, N.E., W.M. Hanemann, and C.L. Kling. 1987. Estimating the value of water quality improvements in a recreational demand framework. Water Resources Research 23: 951–960.

    Article  Google Scholar 

  • Bockstael, N.E., W.M. Hanemann, and I.E. Strand. 1984. Measuring the benefits of water quality improvements using recreation demand models. Report presented to the U.S. Environmental Protection Agency. College Park: University of Maryland.

    Google Scholar 

  • Bokusheva, R., and S.C. Kumbhakar. 2014. A distance function model with good and bad outputs, 2014 International Congress, August 26–29, Ljubljana, Slovenia 182765, European Association of Agricultural Economists.

    Google Scholar 

  • Boone, J. 2008a. A new way to measure competition. Economic Journal 118: 1245–1261.

    Article  Google Scholar 

  • Boone, J. 2008b. Competition: Theoretical parameterizations and empirical measures. Journal of Institutional and Theoretical Economics 164: 587–611.

    Article  Google Scholar 

  • Boyd, G., R. Färe, and S. Grosskopf. 1999. Productivity growth with CO2 as an undesirable output, mimeo.

    Google Scholar 

  • Boyle, K.J. 2017. Contingent valuation in practice, A primer on nonmarket valuation. In The economics of non-market goods and resources, vol. 13, 83–131. Dordrecht: Springer.

    Google Scholar 

  • Boyle, K.J., P.J. Poor, and L.O. Taylor. 1999. Estimating the demand for protecting freshwater lakes from eutrophication. American Journal of Agricultural Economics 81: 1118–1122.

    Article  Google Scholar 

  • Boyle, K.J., M. Morrison, D.H. MacDonald, R. Duncan, and J. Rose. 2016. Investigating Internet and mail implementation of stated-preference surveys while controlling for differences in sample frames. Environmental & Resource Economics 64: 401–419.

    Article  Google Scholar 

  • Brady, M., and E. Irwin. 2011. Accounting for spatial effects in economic models of land use: Recent developments and challenges ahead. Environmental & Resource Economics 48: 487–509.

    Article  Google Scholar 

  • Brent, R. 2006. Applied cost-benefit analysis. Cheltenham: Edward Elgar.

    Google Scholar 

  • Bresnahan, T.F. 1982. The oligopoly solution concept is identified. Economics Letters 10: 87–92.

    Article  Google Scholar 

  • Bresnahan, T.F. 1987. Competition and collusion in the American automobile oligopoly: The 1955 price war. Journal of Industrial Economics 35: 457–482.

    Article  Google Scholar 

  • Bresnahan, T.F. 1989. Empirical studies of industries with market power. In The handbook of industrial organization, vol. 2, ed. Richard Schmalensee and Robert D. Willig, 1011–1057. Amsterdam: North-Holland.

    Google Scholar 

  • Brown, B. 1983. The identification problem in systems nonlinear in the variables. Econometrica 51: 175–196.

    Article  Google Scholar 

  • Brown, D.J., and R.L. Matzkin. 1998. Estimation of nonparametric functions in simultaneous equations models with application to consumer demand. Working paper, Yale University.

    Google Scholar 

  • Bulow, J., and P. Klemperer. 1999. Prices and the winner’s curse. RAND Journal of Economics 33: 1–21.

    Article  Google Scholar 

  • Burt, O.R., and D. Brewer. 1971. Estimation of net social benefits from outdoor recreation. Econometrica 39: 813–827.

    Article  Google Scholar 

  • Captain, P.F., D.H. Good, R.C. Sickles, and A. Ayyar. 2007. What if the European airline industry had deregulated in 1979? A Counterfactual Dynamic Simulation, the Economics of Airline Institutions 2: 125–146.

    Google Scholar 

  • Carson, R.T., and T. Groves. 2007. Incentive and information properties of preference questions. Environmental & Resource Economics 37: 181–210.

    Article  Google Scholar 

  • Carson, R.T., T. Groves, and J.A. List. 2014. Consequentiality: A theoretical and experimental exploration of a single binary choice. Journal of the Association of Environmental and Resource Economists 1: 171–207.

    Article  Google Scholar 

  • Carson, R.T., W.M. Hanemann, and T.C. Wegge. 1987. Southcentral Alaska Sport Fishing Study. Report prepared by Jones and Stokes Associates for the Alaska Department of Fish and Game. Anchorage, AK.

    Google Scholar 

  • Chambers, R.G., Y. Chung, and R. Färe. 1996. Benefit and distance functions. Journal of Economic Theory 70: 407–419.

    Article  Google Scholar 

  • Chambers, R.G., Y. Chung, and R. Färe. 1998. Profit, directional distance functions and Nerlovian efficiency. Journal of Optimization Theory and Applications 95: 351–364.

    Article  Google Scholar 

  • Chowdhury, A., and C.H. Kirkpatrick. 1994. Development policy and planning: An introduction to models and techniques. London: Routledge.

    Google Scholar 

  • Chung, Y.H., R. Färe, and S. Grosskopf. 1997. Productivity and undesirable outputs: A directional distance function approach. Journal of Environmental Management 51: 229–240.

    Article  Google Scholar 

  • Cicchetti, C.J., A.C. Fisher, and V.K. Smith. 1976. An econometric evaluation of a generalized consumer surplus measure: The Mineral King controversy. Econometrica 44: 1259–1276.

    Article  Google Scholar 

  • Clawson, M. 1959. Methods of measuring the demand for and value of outdoor recreation, Reprint N°10. Washington, DC: Resources for the Future Inc.

    Google Scholar 

  • Coelli, T., G. Hajarhasht, and C.A.K. Lovell. 2008. Econometric estimation of an input distance function in a system of equations. Center for Efficiency and Productivity Analysis, WP01/2008.

    Google Scholar 

  • Coggins, J.S., and J.R. Swinton. 1996. The price of pollution: A dual approach to valuing SO2 allowances. Journal of Environmental Economics and Management 30: 58–72.

    Article  Google Scholar 

  • Corts, K.S. 1999. Conduct parameters and the measurement of market power. Journal of Econometrics 88: 227–250.

    Article  Google Scholar 

  • Cropper, M.L., L.B. Deck, and K.E. McConnell. 1988. On the choice of functional form for hedonic price functions. Review of Economics and Statistics 70: 668–675.

    Article  Google Scholar 

  • Cross, R., R. Färe, S. Grosskopf, and W.L. Weber. 2013. Valuing vineyards: A Directional distance function approach. Journal of Wine Economics 8: 69–82.

    Article  Google Scholar 

  • Drèze, J., and N. Stern. 1990. Policy reform, shadow prices, and market prices. Journal of Public Economics 42: 1–45.

    Article  Google Scholar 

  • Duygun, M., M. Shaban, R.C. Sickles, and T. Weyman-Jones. 2015. How regulatory capital requirement affects banks’ productivity: An Application to emerging economies’ banks. Journal of Productivity Analysis 44: 237–248.

    Article  Google Scholar 

  • Farber, S. 1987. The value of coastal wetlands for protection of property against hurricane wind Damage. Journal of Environmental Economics and Management 14: 143–151.

    Article  Google Scholar 

  • Färe, R. 1988. Fundamentals of production theory. Lecture Notes in Economics and Mathematical Systems. Berlin: Springer-Verlag.

    Google Scholar 

  • Färe, R., and S. Grosskopf. 1990. A distance function approach to price efficiency. Journal of Public Economics 43: 123–126.

    Article  Google Scholar 

  • Färe, R., R. Grosskopf, and W.L. Weber. 2006. Shadow prices and pollution costs in the US agriculture. Ecological Economics 56: 89–103.

    Article  Google Scholar 

  • Färe, R., S. Grosskopf, and W.L. Weber. 2001. Shadow prices of Missouri public conservation land. Public Finance Review 29: 444–460.

    Article  Google Scholar 

  • Färe, R., S. Grosskopf, C. Shang, and R.C. Sickles. 2015. Pricing characteristics: An application of Shephard’s dual lemma, RISE Working Paper, No. 15-013.

    Google Scholar 

  • Färe, R., S. Grosskopf, D.-W. Noh, and W. Weber. 2005. Characteristics of a polluting technology: Theory and practice. Journal of Econometrics 126: 469–492.

    Article  Google Scholar 

  • Färe, R., S. Grosskopf, K.C.A. Lovell, and S. Yaisawarng. 1993. Derivation of shadow prices for undesirable outputs: A distance function approach. Review of Economics and Statistics 75: 374–380.

    Article  Google Scholar 

  • Feather, P.M. 1994. Sampling and aggregation issues in random utility model estimation. American Journal of Agricultural Economics 76: 772–780.

    Article  Google Scholar 

  • Fernández, C., G. Koop, and M.F.J. Steel. 2002. Multiple-output production with undesirable outputs: An application to nitrogen surplus in agriculture. Journal of the American Statistical Association 97: 432–442.

    Article  Google Scholar 

  • Formby, J.P., and S. Layson. 1982. Allocative inefficiency and measures of market power. Atlantic Economic Journal 10: 67–70.

    Article  Google Scholar 

  • Førsund, F.R. 2009. Good modelling of bad outputs: Pollution and multiple-output production. International Review of Environmental and Resource Economics 3: 1–38.

    Article  Google Scholar 

  • Freeman III, A.M. 1979. The benefits of environmental improvement: Theory and practice. Baltimore, MD: Johns Hopkins University Press.

    Google Scholar 

  • Freeman III, A.M. 1995. Hedonic Pricing Methods. In The handbook of environmental economics, ed. D.W. Bromley, 672–686. Cambridge, MA, USA and Oxford, UK: Blackwell.

    Google Scholar 

  • Freeman III, A.M. 2003. The measurement of environmental and resource values: Theory and methods, 2nd ed. Washington, DC: Resources for the Future.

    Google Scholar 

  • Getachew, L., and R.C. Sickles. 2007. The policy environment and relative price efficiency of Egyptian private sector manufacturing: 1987/88–1995/96. Journal of Applied Econometrics 22: 703–728.

    Article  Google Scholar 

  • Gollop, F.M., and M.J. Roberts. 1979. Firm interdependence in oligopolistic markets. Journal of Econometrics 16: 617–645.

    Google Scholar 

  • Good, D.H., L. Röller, and R.C. Sickles. 1993. US airline deregulation: Implications for European transport. Economic Journal 103: 1028–1041.

    Article  Google Scholar 

  • Good, D.H., M.I. Nadiri, and R.C. Sickles. 1991. The structure of production, technical change and efficiency in a multinational industry: An application to U.S. airlines. National Bureau of Economic Research Working Paper No. 3939.

    Google Scholar 

  • Good, D.H., R.C. Sickles, and J. Weiher. 2008. A hedonic price index for airline travel. Review of Income and Wealth 54: 438–465.

    Article  Google Scholar 

  • Graddy, K. 1995. Testing for imperfect competition at the Fulton fish market. RAND Journal of Economics 25: 37–57.

    Google Scholar 

  • Griliches, Z. 1961. Hedonic price indexes for automobiles: An econometric analysis of quality change. In Price statistics of the federal government. Washington, DC: U.S. Government Printing Office.

    Google Scholar 

  • Grosskopf, S., K. Hayes, L.L. Taylor, and W.L. Weber. 1999. Allocative inefficiency and school competition. Proceedings: Ninety-First Annual Conference 1998, National Tax Association, 282–290.

    Google Scholar 

  • Hammack, J., and G.M. Brown Jr. 1974. Waterfowl and wetlands: Toward bioeconomic analysis. Baltimore, MD: Johns Hopkins University Press.

    Google Scholar 

  • Harberger, A. 1954. Monopoly and resource allocation. American Economic Review 44: 77–87.

    Google Scholar 

  • Harberger, A. 1978. On the use of distributional weights in social cost-benefit analysis. Journal of Political Economy 86: 87–120.

    Article  Google Scholar 

  • Hasannasab, M., D. Margaritis, and C. Staikouras. 2018. The financial crisis and the shadow price of bank capital. Working Paper, University of Auckland.

    Google Scholar 

  • Hauber, A.B., and G.R. Parsons. 2000. The effect of nesting structure specification on welfare estimation in a random utility model of recreation demand: An application to the demand for recreational fishing. American Journal of Agricultural Economics 82: 501–514.

    Article  Google Scholar 

  • Hausman, J. 2012. Contingent valuation: From dubious to hopeless. Journal of Economic Perspectives 26: 43–56.

    Article  Google Scholar 

  • Hellerstein, D.M. 1991. Using count data models in travel cost analysis with aggregate data. American Journal of Agricultural Economics 73: 860–866.

    Article  Google Scholar 

  • Hellerstein, D.M. 1992. The treatment of nonparticipants in travel cost analysis and other demand models. Water Resources Research 28: 1999–2004.

    Article  Google Scholar 

  • Hellerstein, D.M., and R. Mendelsohn. 1993. A theoretical foundation for count data models. American Journal of Agricultural Economics 75: 604–611.

    Article  Google Scholar 

  • Hetemäki, L. 1996. Essays on the impact of pollution control on a firm: A distance function approach. Research Papers, vol. 609. The Finnish Forest Research Institute, Helsinki.

    Google Scholar 

  • Hicks, J. 1935. Annual survey of economic theory: The theory of monopoly. Econometrica 3: 1–20.

    Article  Google Scholar 

  • Irwin, E.G., and N.E. Bockstael. 2001. The problem of identifying land use spillovers: Measuring the effects of open space on residential property values. American Journal of Agricultural Economics 83: 698–704.

    Article  Google Scholar 

  • Iwata, G. 1974. Measurement of conjectural variations in oligopoly. Econometrica 42: 947–966.

    Article  Google Scholar 

  • Jeon, B.M., and R.C. Sickles. 2004. The role of environmental factors in growth accounting. Journal of Applied Econometrics 19: 567–591.

    Article  Google Scholar 

  • Karakaplan, M.U., and L. Kutlu. 2019. Estimating market power using a composed error model. Scottish Journal of Political Economy 66: 489–510.

    Google Scholar 

  • Kling, C.L., D.J. Phaneuf, and J. Zhao. 2012. From Exxon to BP: Has some number become better than no number? Journal of Economic Perspectives 26: 3–26.

    Article  Google Scholar 

  • Koetter, M., J.W. Kolari, and L. Spierdijk. 2012. Enjoying the quiet life under deregulation? Evidence from Adjusted Lerner Indices for US Banks, Review of Economics and Statistics 94: 462–480.

    Google Scholar 

  • Kumbhakar, S.C., S. Baardsen, and G. Lien. 2012. A new method for estimating market power with an application to Norwegian sawmilling. Review of Industrial Organization 40: 109–129.

    Article  Google Scholar 

  • Kuminoff, N.V., C.F. Parmeter, and J.C. Pope. 2010. Which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities? Journal of Environmental Economics and Management 60: 145–160.

    Article  Google Scholar 

  • Kutlu, L. 2017. A conduct parameter model of price discrimination. Scottish Journal of Political Economy 64: 530–536.

    Article  Google Scholar 

  • Kutlu, L., and R.C. Sickles. 2012. Estimation of market power in the presence of firm level inefficiencies. Journal of Econometrics 168: 141–155.

    Article  Google Scholar 

  • Kutlu, L., and R.C. Sickles. 2017. Measuring market power when firms price discriminate. Empirical Economics 53: 287–305.

    Google Scholar 

  • Kutlu, L., and R. Wang. 2018. Estimation of cost efficiency without cost data. Journal of Productivity Analysis 49: 137–151.

    Article  Google Scholar 

  • Lau, L.J. 1982. On identifying the degree of competitiveness from industry price and output Data. Economics Letters 10: 93–99.

    Article  Google Scholar 

  • Lau, L.J., and P.A. Yotopoulos. 1971. A test for relative efficiency and application to Indian agriculture. American Economic Review 61: 94–109.

    Google Scholar 

  • Lee, J.D., J.B. Park, and T.Y. Kim. 2002. Estimation of the shadow prices of pollutants with production/environment efficiency taken into account: A nonparametric directional distance function approach. Journal of Environmental Management 64: 365–375.

    Article  Google Scholar 

  • Lerner, A.P. 1934. The concept of monopoly and measurement of monopoly power. Review of Economic Studies 1: 157–175.

    Article  Google Scholar 

  • Lindhjem, H., and S. Navrud. 2011. Using Internet in stated preference surveys: A review and comparison of survey modes. International Review of Environmental and Resource Economics 5: 309–351.

    Article  Google Scholar 

  • Little, I., and J. Mirrlees. 1969. Manual of industrial project analysis in developing countries, vol. 2. Paris: Organisation for Economic Cooperation and Development.

    Google Scholar 

  • Little, I., and J. Mirrlees. 1974. Project appraisal and planning for developing countries. London: Heinemann.

    Google Scholar 

  • Lovell, C.A.K., and R.C. Sickles. 1983. Testing efficiency hypotheses in joint production: A parametric approach. Review of Economics and Statistics 65 (1): 51–58.

    Article  Google Scholar 

  • MacMillan, D., N. Hanley, and N. Leinhoop. 2006. Contingent valuation: Environmental polling or preference engine? Ecological Economics 60: 299–307.

    Article  Google Scholar 

  • Malikov, E., R. Bokusheva, and S.C. Kumbhakar. 2016. A hedonic output index based approach to modeling polluting technologies. Empirical Economics 54 (1): 287–308.

    Google Scholar 

  • Maudos, J., and J.F. Guevara. 2007. The cost of market power in banking: Social welfare loss vs. cost inefficiency. Journal of Banking & Finance 31: 2103–2125.

    Article  Google Scholar 

  • Michener, R., and C. Tighe. 1992. A Poisson regression model of highway fatalities. American Economic Review 82: 452–456.

    Google Scholar 

  • Mitchell, R.C., and R.T. Carson. 1989. Using surveys to value public goods: The contingent valuation method. Washington, DC: Resources for the Future.

    Google Scholar 

  • Munro, A. 2005. Household willingness to pay equals individual willingness to pay if and only if the household income pools. Economics Letters 88: 227–230.

    Article  Google Scholar 

  • Murty, S., R.R. Russell, and S.B. Levkoff. 2012. On modeling pollution-generating technologies. Journal of Environmental Economics and Management 64: 117–135.

    Article  Google Scholar 

  • O’Donnell, C.J., G.R. Griffith, J.J. Nightingale, and R.R. Piggott. 2007. Testing for market power in the Australian grains and oilseeds industries. Agribusiness 23: 349–376.

    Article  Google Scholar 

  • Olson, M.K. 2004. Are novel drugs more risky for patients than less novel drugs? Journal of Health Economics 23: 1135–1158.

    Article  Google Scholar 

  • Orea, L., and J. Steinbuks. 2012. Estimating market power in homogenous product markets using a composed error model: Application to the California electricity market. University of Cambridge, Faculty of Economics.

    Google Scholar 

  • Overseas Development Administration. 1988. Appraisal of projects in developing countries. London: Her Majesty’s Stationery Office.

    Google Scholar 

  • Parsons, K.J. 2017. Travel cost models, A primer on nonmarket valuation. In The economics of non-market goods and resources, vol. 13, 187–233. Dordrecht, The Netherlands: Springer.

    Google Scholar 

  • Parsons, G.R., and M.J. Kealy. 1992. Randomly drawn opportunity sets in a random utility model of lake recreation. Land Economics 68: 93–106.

    Article  Google Scholar 

  • Perloff, J.M., and E.Z. Shen. 2012. Collinearity in linear structural models of market power. Review of Industrial Organization 2: 131–138.

    Article  Google Scholar 

  • Perloff, J.M., L.S. Karp, and A. Golan. 2007. Estimating market power and strategies. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Phaneuf, D.J., and T. Requate. 2016. A course in environmental economics: Theory, policy, and practice. New York: Cambridge University Press.

    Google Scholar 

  • Pindyck, R.S. 1985. The measurement of monopoly power in dynamic markets. Journal of Law and Economics 28: 193–222.

    Article  Google Scholar 

  • Plane, P. 1999. Privatization, technical efficiency and welfare consequences: The case of the Côte d’Ivoire Electricity Company (CIE). World Development 27 (2): 343–360.

    Article  Google Scholar 

  • Poe, G.L., and R.C. Bishop. 1999. Valuing the incremental benefits of groundwater protection when exposure levels are known. Environmental & Resource Economics 13: 347–373.

    Article  Google Scholar 

  • Porter, R. 1983. A study of cartel stability: The joint executive committee 1980–1986. Bell Journal of Economics 14: 301–314.

    Article  Google Scholar 

  • Primont, D.F., and M.F. Kokoski. 1990. Comparing prices across cities: A hedonic approach. BLS Working Papers #204.

    Google Scholar 

  • Puller, S.L. 2007. Pricing and firm conduct in California’s deregulated electricity market. Review of Economics and Statistics 89: 75–87.

    Article  Google Scholar 

  • Puller, S.L. 2009. Estimation of competitive conduct when firms are efficiently colluding: Addressing the Corts critique. Applied Economics Letters 16: 1497–1500.

    Article  Google Scholar 

  • Quiggin, J. 1998. Individual and household willingness to pay for public goods. American Journal of Agricultural Economics 80: 58–63.

    Article  Google Scholar 

  • Quigley, J.M. 1982. Nonlinear budget constraints and consumer demand: An application to public programs for residential housing. Journal of Urban Economics 12: 177–201.

    Article  Google Scholar 

  • Randall, A., B. Ives, and C. Eastman. 1974. Bidding games for evaluation of aesthetic environmental improvements. Journal of Environmental Economics and Management 1: 132–149.

    Article  Google Scholar 

  • Ray, A. 1984. Cost-Benefit Analysis. Baltimore, MD: Johns Hopkins University Press.

    Google Scholar 

  • Rhoades, S.A. 1982. Welfare loss, redistribution effect, and restriction in output due to monopoly in banking. Journal of Monetary Economics 9: 375–387.

    Article  Google Scholar 

  • Ridker, R.G., and J.A. Henning. 1967. The determinants of residential property values with special reference to air pollution. Review of Economics and Statistics 49: 246–257.

    Article  Google Scholar 

  • Roehrig, C.S. 1988. Conditions for identification in nonparametric and parametric models. Econometrica 56: 433–447.

    Article  Google Scholar 

  • Röller, L.H., and R.C. Sickles. 2000. Capacity and product market competition: Measuring market power in a ‘puppy-dog’ industry. International Journal of Industrial Organization 18: 845–865.

    Article  Google Scholar 

  • Rose, N.L. 1990. Profitability and product quality: Economic determinants of airline safety performance. Journal of Political Economy 98: 944–964.

    Article  Google Scholar 

  • Rosen, S. 1974. Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy 82: 34–55.

    Article  Google Scholar 

  • Rosenthal, R. 1980. A model in which an increase in the number of sellers leads to a higher price. Econometrica 48: 1575–1599.

    Article  Google Scholar 

  • Schwartz, A.E., and B.P. Scafidi. 2000. Quality adjusted price indices for four year colleges, Mimeo, New York University and Georgia State University.

    Google Scholar 

  • Shaw, D. 1988. On-site samples’ regression: Problems of non-negative integers, truncation, and endogenous stratification. Journal of Econometrics 37: 211–223.

    Article  Google Scholar 

  • Shephard, R.W. 1953. Cost and production functions. Princeton: Princeton University Press.

    Google Scholar 

  • Shephard, R.W. 1970. Theory of cost and production functions. Princeton: Princeton University Press.

    Google Scholar 

  • Sickles, R.C., and M.L. Streitwieser. 1998. An analysis of technology, productivity, and regulatory distortion in the interstate natural gas transmission industry: 1977–1985. Journal of Applied Econometrics 13: 377–395.

    Article  Google Scholar 

  • Sickles, R.C., D. Good, and R.L. Johnson. 1986. Allocative distortions and the regulatory transition of the U.S. airline industry. Journal of Econometrics 33: 143–163.

    Article  Google Scholar 

  • Spiller, P.T., and E. Favaro. 1984. The effects of entry regulation or oligopolistic interaction: The Uruguayan banking sector. RAND Journal of Economics 15: 244–254.

    Article  Google Scholar 

  • Squire, L., and H. van der Tak. 1975. Economic analysis of projects. Baltimore, MD: Johns Hopkins University Press.

    Google Scholar 

  • Stiglitz, J. 1989. Imperfect information in the product market. In The handbook of industrial organization, vol. 1, ed. Richard Schmalensee and Robert D. Willig, 769–847. Amsterdam: North-Holland.

    Chapter  Google Scholar 

  • Stole, L.A. 2007. Price discrimination and competition. In The handbook of industrial organization, vol. 3, ed. M. Armstrong and R. Porter, 2221–2299. Amsterdam: North-Holland.

    Google Scholar 

  • Swinton, J.R. 1998. At what cost do we reduce pollution? Shadow prices of SO2 emissions. Energy Journal 19: 63–83.

    Article  Google Scholar 

  • Taylor, L.O. 2017. Hedonics, A primer on nonmarket valuation. In The economics of non-market goods and resources, vol. 13, 235–292. Dordrecht, The Netherlands: Springer.

    Google Scholar 

  • Timmins, C., and J. Murdock. 2007. A revealed preference approach to the measurement of congestion in travel cost models. Journal of Environmental Economics and Management 53: 230–249.

    Article  Google Scholar 

  • Train, K.E. 1998. Recreation demand models with taste differences over people. Land Economics 74: 230–239.

    Article  Google Scholar 

  • Trice, A.H., and S.E. Wood. 1958. Measurement of recreation benefits. Land Economics 34: 195–207.

    Article  Google Scholar 

  • Triplett, J.E. 1984. Measuring technological change with characteristics-space technique. BLS Working Papers #141.

    Google Scholar 

  • Triplett, J.E. 2004. Handbook on hedonic indexes and quality adjustments in price indexes: Special application to information technology products. Washington, DC: Brookings Institution.

    Google Scholar 

  • Tsionas, E., S.C. Kumbhakar, and E. Malikov. 2015. Estimation of input distance functions: A system approach, Munich Personal RePEc Archive.

    Google Scholar 

  • UNIDO. 1972. Guidelines for project evaluation. New York: United Nations Industrial Development Organization.

    Google Scholar 

  • Vardanyan, M., and D.-W. Noh. 2006. Approximating pollution abatement costs via alternative specifications of a multi-output production technology: A case of the U.S. electric utility industry. Journal of Environmental Management 80: 177–190.

    Article  Google Scholar 

  • Waugh, F.V. 1928. Quality factors influencing vegetable prices. Journal of Farm Economics 10: 185–196.

    Article  Google Scholar 

  • Weiher, J.C., R.C. Sickles, and J. Perloff. 2002. Market power in the US airline industry. In Measuring market power, ed. D.J. Slottje, 309–323. Amsterdam: North-Holland.

    Google Scholar 

  • Winkelmann, R. 2003. Econometric analysis of count data, 4th ed. Berlin: Springer-Verlag.

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Ernst and Young LLP, New York City, NY, USA

    Aditi Bhattacharyya

  2. University of Texas Rio Grande Valley, Edinburg, TX, USA

    Levent Kutlu

  3. Department of Economics, Rice University, Houston, TX, USA

    Robin C. Sickles

Authors
  1. Aditi Bhattacharyya
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Levent Kutlu
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Robin C. Sickles
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Robin C. Sickles .

Editor information

Editors and Affiliations

  1. Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands

    Thijs ten Raa

  2. Stern School of Business, New York University, New York, NY, USA

    William H. Greene

Rights and permissions

Reprints and permissions

Copyright information

© 2019 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Bhattacharyya, A., Kutlu, L., Sickles, R.C. (2019). Pricing Inputs and Outputs: Market Prices Versus Shadow Prices, Market Power, and Welfare Analysis. In: ten Raa, T., Greene, W. (eds) The Palgrave Handbook of Economic Performance Analysis. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-23727-1_13

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-23727-1_13

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-23726-4

  • Online ISBN: 978-3-030-23727-1

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation