Production functions are a central component in a variety of economic analyses. However, these production functions often first need to be estimated using data on individual production units. There is reason to believe that, more than any other input in the production process, there are severe...

This paper estimates the extent to which market power is a source of production misallocation. Productive inefficiency occurs through more production being allocated to higher cost units of production, and less production to lower-cost production units, conditional on a fixed aggregate quantity....