Boone Indicator for Market Competition
The Boone indicator is a new measure of competition based on the theoretical assumption that, in a more eﬃcient or competitive industry, ﬁrms are punished severely for being ineﬃcient (Boone et al., 2005, 2007; Boone, 2008). Hence, for an industry with a high level of competition, it is expected that an increase in marginal cost leads to a drastic fall in variable proﬁts. Therefore, the Boone indicator is
measured by estimating the following regression:
where VROAit is the variable proﬁt (measured as sales revenue less cost of goods sold of ﬁrm i in industry j divided by its total assets; lnMcij is the natural logarithm of the marginal cost (approximated by cost of goods sold divided by sales revenue) of ﬁrm i in industry j; and βt is the time-varying parameter, the absolute value of which measures competition. The sign of the coeﬃcients is expected to be negative. The higher the absolute value of the coeﬃcients, the higher is the level of competition in the industry.
Our Stata code
We have written a clean, easy-to-follow, and efficient code in the Stata language. The code is well-commented. Each line of code is preceded by a line or two of comments. This makes understanding of the code easier and enjoyable.
What is included in the code
1. The source code in plain text. This means you can access the code and execute it line by line as a do file in one go.
2. The code has detailed comments. These comments explains the logic and the purpose of each line of code
3. All required Stata community-contributed packages that are needed to run the code
4. A dummy data set to apply the code. If you have raw data and want us to process the data to make it compatible with the code, you may contact through email.
The code is available for $99 with example data. You can pay using Paypal / WISE / or any crypto currency. For any of these options, please contact
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How the files are shared?
Once you make the payment using the above links, you need to email us so that we can send the files to you.
Griffith, R., Boone, J., & Harrison, R. (2005). Measuring competition. Advanced Institute of Management Research Paper, (022).
Boone, J. (2008). A new way to measure competition. The Economic Journal, 118(531), 1245-1261.
Boone, J., Van Ours, J. C., & Van Der Wiel, H. (2007). How (not) to measure competition. TILEC Discussion Paper No. 2007-014.
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