The well-known structural model used to estimate market structure suffers from a severe collinearity problem if the marginal cost and demand equations are linear.

Collinearities among explanatory variables in linear regression models affect estimates from survey data just as t hey do in non-survey data. Unde sirable effects are unnecessarily inflated standard err ors, spuriously low or high t-statistics, and parameter estimates with illogical signs. The available collinearity diagnostics are not generally appropriate for survey data because the variance ...