AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Production Functions under Imperfect Competition: A Quality-Equivalent Cournot Model
AEA Papers and Proceedings
(pp. 475–482)
Abstract
We discuss the limitations of using unit quantity data to measure output in the estimation of production functions. We introduce a simple model, the quality-equivalent Cournot model, where revenue or deflated revenue is the preferable measure of output as it allows consistent estimation of output elasticities and markups. In contrast, because reported units are not comparable across firms, relying on quantity data for productivity analysis or to generate output elasticities used in the production approach to markup estimation may be problematic.Citation
Ackerberg, Daniel A., and Jan De Loecker. 2026. "Production Functions under Imperfect Competition: A Quality-Equivalent Cournot Model." AEA Papers and Proceedings 116: 475–482. DOI: 10.1257/pandp.20261106Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- D21 Firm Behavior: Theory
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection