Author(s)

Hiroshi Gunji¹, Yuan Yuan²

¹Faculty of Economics, Daito Bunka University, Tokyo, Japan.
²Faculty of Economics and Management, East China Normal University, Shanghai, China.

In this note, we prove that even if the technology of firms exhibits increasing returns to scale, the Panzar-Rosse statistic in a monopolistic competitive market is still available and has a negative value. Further, we show that the statistic would be greater than unity if firms with increasing-returns-to-scale technology were to choose a saddle point under certain conditions. This implies that the value of greater than unity is not actually observed.

Panzar-Rosse Statistic, Monopolistic Competition, Increasing Returns to Scale

Gunji, H. and Yuan, Y. (2017) The Panzar-Rosse Statistic Revisited. Theoretical Economics Letters, 7, 30-34. doi: 10.4236/tel.2017.71004.