Measuring market power in the US aluminum industry: A residual demand approach

This paper applies a refined market power test to examine market power in t he U.S. aluminum industry. The study conducts a two-step analysis in which the inverse residual demand facing the industry is first estimated to gener ate the associate elasticity to infer market power, and then the inverse pa rtial residual demand facing the industry is estimated to produce the elast icity to measure the potential effect of inter-industry coordination. The r esults suggest that only the primary industry attains market power, and the market power can exert even without collusion between the primary and seco ndary industries.