An empirical test of monopoly behaviour: An application to the Hardwood case: A comment

A recent article in this journal, Alexander (1988), tests whether the exchange of price information in the 1921 Hardwood case was a means of fixing prices or a way of coping with costly information. Alexander makes two serious errors. Both errors involve the incorrect use of a technique used to measure price-cost margins to determine the extent to which an industry is monopolistic, competitive, or somewhere in between. I re-estimate Alexander's model correcting his two errors. In addition, I improve his data set. Alexander's conclusion that the price association was pro-competitive, although drawn incorrectly, is shown to be correct.