<p>That that we have linear supply and demand functions, pretty much the simplest case such that quantity supplied of good $i$ is:
$$ Q_{s,i,t} = \alpha_{0,i,t} + \alpha_{1,i,t} \cdot P_{i,t}$$
and quantity demanded is:
$$ Q_{d,i,t} = \beta_{0,i,t} + \beta_{1,i,t} \cdot P_{i,t}$$</p>

<p>In equilibrium  $Q_{i,t}=Q_{d,i,t}=Q_{s,i,t}$ so substitute and solve:
$$ Q_{i,t} = \alpha_{0,i,t} + \alpha_{1,i,t} \cdot P_{i,t} = \beta_{0,i,t} + \beta_{1,i,t} \cdot P_{i,t}$$
$$ P_{i,t} = \frac{\alpha_{0,i,t}-\beta_{0,i,t}}{\beta_{1,i,t} - \alpha_{1,i,t}}$$</p>

<p>As you can see, the price depends on supply and demand. Unfortunately, shifts to the level or slope of either the supply or demand functions both affect the price. Therefore, in  general, you can't tell anything about the supply function from the behavior of the price. And if you can't tell anything about the supply function I don't see how you'd know anything about the IO of the producer industries. </p>

CC BY-SA 3.0
2016-05-06T15:05:26.740Z
2016-05-06T18:07:52.677Z
2016-05-06T18:07:52.677Z
BKay
<p>I have three goods:</p>

<ul>
<li>beer</li>
<li>carp (fish)</li>
<li>museum ticket</li>
</ul>

<p>Is it possible to tell anything about market structure if I have annual price data of the industries? Here's the time-series plot on a single graph:
<a href="https://i.sstatic.net/8ypWs.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/8ypWs.png" alt="enter image description here"></a>
I would like to give advice whether a firm should entry the market or not. Is is it possible to decode price data like "the incumbent firms must have been playing a Bertrand's price competition game at the carp market"? Or do I need further details to say anything about the market structure?</p>

<p>Is it possible to apply IO theory if I have only price data of an industry? I really need some clues, please.</p>

<time-series><industrial-organisation><empirical-evidence>
Is it possible to tell anything about market structure if I have annual price data of the industries?
Übel Yildmar
# Is it possible to tell anything about market structure if I have annual price data of the industries?

(Asked by: username_0 on 2016-05-06)

I have three goods:

* beer
* carp (fish)
* museum ticket

Is it possible to tell anything about market structure if I have annual price data of the industries? Here's the time-series plot on a single graph:
[![enter image description here](https://i.sstatic.net/8ypWs.png)](https://i.sstatic.net/8ypWs.png)
I would like to give advice whether a firm should entry the market or not. Is is it possible to decode price data like "the incumbent firms must have been playing a Bertrand's price competition game at the carp market"? Or do I need further details to say anything about the market structure?

Is it possible to apply IO theory if I have only price data of an industry? I really need some clues, please.

**Tags:** time-series, industrial-organisation, empirical-evidence

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## 1 answers

### Answer by username_1 on 2016-05-06. Score: 2

That that we have linear supply and demand functions, pretty much the simplest case such that quantity supplied of good $i$ is:
$$ Q\_{s,i,t} = \alpha\_{0,i,t} + \alpha\_{1,i,t} \cdot P\_{i,t}$$
and quantity demanded is:
$$ Q\_{d,i,t} = \beta\_{0,i,t} + \beta\_{1,i,t} \cdot P\_{i,t}$$

In equilibrium $Q\_{i,t}=Q\_{d,i,t}=Q\_{s,i,t}$ so substitute and solve:
$$ Q\_{i,t} = \alpha\_{0,i,t} + \alpha\_{1,i,t} \cdot P\_{i,t} = \beta\_{0,i,t} + \beta\_{1,i,t} \cdot P\_{i,t}$$
$$ P\_{i,t} = \frac{\alpha\_{0,i,t}-\beta\_{0,i,t}}{\beta\_{1,i,t} - \alpha\_{1,i,t}}$$

As you can see, the price depends on supply and demand. Unfortunately, shifts to the level or slope of either the supply or demand functions both affect the price. Therefore, in general, you can't tell anything about the supply function from the behavior of the price. And if you can't tell anything about the supply function I don't see how you'd know anything about the IO of the producer industries.


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