pyRVtest.build_markups

pyRVtest.build_markups(products, demand_results, model_downstream, ownership_downstream, model_upstream=None, ownership_upstream=None, vertical_integration=None, custom_model_specification=None, user_supplied_markups=None)

This function computes markups for a large set of standard models.

The models that this package is able to compute markups for include:

• standard bertrand with ownership matrix based on firm id

• price setting with arbitrary ownership matrix (e.g. profit weight model)

• standard cournot with ownership matrix based on firm id

• quantity setting with arbitrary ownership matrix (e.g. profit weight model)

• monopoly

• bilateral oligopoly with any combination of the above models upstream and downstream

• bilateral oligopoly as above but with subset of products vertically integrated

• any of the above with consumer surplus weights

In order to compute markups, the products data and PyBLP demand estimation results must be specified, as well as at least a model of downstream conduct. If model_upstream is not specified, this is a model without vertical integration.

Parameters

• products (recarray) – The product_data containing information on markets and product characteristics. This should be the same as the data used for demand estimation. To compute markups, this data must include prices, market_ids, and shares.

• demand_results (structured array-like) – The results object obtained from using the pyBLP demand estimation procedure. We use built-in PyBLP functions to return the demand Jacobians and Hessians (first and second derivatives of shares with respect to prices).

• model_downstream (ndarray) – The model of conduct for downstream firms. Can be one of [bertrand, cournot, monopoly, perfect_competition, other]. Only specify option other if supplying a custom markup formula.

• ownership_downstream (ndarray) – The ownership matrix for price or quantity setting (optional, default is standard ownership).

• model_upstream (ndarray, optional) – Upstream firm model of conduct. Only specify option other if supplying a custom markup formula. Can be one of [‘none’ (default), bertrand, cournot, monopoly, perfect_competition, other].

• ownership_upstream (ndarray, optional) – Ownership matrix for price or quantity setting of upstream firms (optional, default is None).

• vertical_integration (ndarray, optional) – Vector indicating which product_ids are vertically integrated (ie store brands) (optional, default is None).

• custom_model_specification (dict, optional) – Dictionary containing a custom markup formula and the name of the formula (optional, default is None).

• user_supplied_markups (ndarray, optional) – Vector containing user-computed markups (optional, default is None). If user supplied own markups, this function simply returns them.

Returns

. Computed markups, downstream markups, and upstream markups for each model.

Return type

tuple[list, list, list]

Notes

For models without vertical integration, firm_ids must be defined in product_data for vi models, and firm_ids_upstream and firm_ids (=firm_ids_downstream) must be defined.