This Paper introduces a new way to measure competition based on firms' profits. Within a general model, we derive … conditions under which this measure is monotone in competition, where competition can be intensified both through a fall in entry … competition. …

The Profit Elasticity (PE) is a new competition measure introduced in Boone (2008). So far, there was no direct proof … that this measure can identify regimes of competition empirically. This paper focuses on this issue using data of Genesove … and Mullin (1998) in which different regimes of competition are identified. We derive a version of PE suitable for this …

We introduce a new measure of competition: the elasticity of a firm's profits with respect to its cost level. A higher … value of this profit elasticity (PE) signals more intense competition. Using firm-level data we compare PE with the most … popular competition measures such as the price cost margin (PCM). We show that PE and PCM are highly correlated on average …