Empirical techniques commonly used in industrial organization to measure ma
rket power exertion typically assume imperfectly competitive behaviour by f
irms on only one side of the market. Firms on the other side are assumed to
be perfectly competitive. In this paper we extend traditional NEIO methods
by developing a method to estimate market power exertion when firms on bot
h sides have potential market power. Using Monte Carlo simulations, we find
that the model correctly estimates market power exercised by firms on eith
er or both sides of a market and also correctly estimates firms' technology
parameters. When applied to the US leaf tobacco market, findings indicate
that cigarette manufacturers exert some monopsony power in purchasing leaf
tobacco while producers, organized as a cartel, exhibit no countervailing m
onopoly market power. Copyright (C) 2000 John Wiley (C) Sons, Ltd.