Empirical work on price-cost margins often treats costs as exogenous. Allowing for endogenous costs when estimating … third equation, which endogenizes costs. We implement the model using data for eight European airlines from 1976-1994, and … show that the treatment of endogenous costs has important implications for the measurement of price-cost margins and the …

start-up costs and opinion reporting, it fails to differentiate between firm cost allocation and apportionment. The model …