Measuring Monopoly Power of Manufacturing Industry in Iran: Stochastic Frontier Functions Approach

The aim of this paper is introducing a new method to estimation monopoly power and uses it for 136 Iranian manufacturing industries at 4 digits ISIC level during 2005-2013. The method used is stochastic frontier approach. The results indicate that the markup of nearly 98 percent of manufacturing industries is between 10 and 40 percent and they have an uncompetitive behavior. The average industries markup in Iran had a rising trend over time, reducing their average returns to scale. According to the results; there are suggested canceling the exclusive advantages that used to grant to some industries, lowering the tariff for increasing foreign competition with implementation necessary standards in order to production, importing industerial outputs and expanding industerial activities in the form of cooperatives.