Discussion Papers,
Statistics Norway, Research Department

Abstract: The hypothesis of market power in the Norwegian primary aluminium industry is tested using plant-level panel data. Economies of scale are found to be present, and Norwegian aluminium plants charge a procyclical price-cost margin that significantly exceeds zero. Consequently, the simple competitive hypothesis is rejected. The hypothesis that products are differentiated is not rejected, since several plants are found to charge a price permanently over the world market price. A decline in industry concentration internationally, which is assumed to increase the degree of competition, has no significant effect on the price-cost margins of Norwegian plants.

Keywords: Market power; Differentiated products; Aluminium industry

JEL-codes: C23; D21; D43; L61 November 1994

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