Chapter 4: The Measurement and Interpretation of Market Dominance
Utton2 01 chaps 4/12/02 16:21 Page 59 4 The measurement and interpretation of market dominance I Introduction We established in Chapter l a number of results concerning the inefficiency of monopoly. It was also apparent, however, that under certain conditions improvements in some types of efficiency may come at the expense of other types. In such cases complex trade-offs are likely to be involved, posing difficult problems for the policy maker. The main concern of this opening chapter of the part of the book which deals with horizontal dominance is to discuss how it might be possible to convert the formal results of monopoly theory into the operational requirements of antitrust policy. It is one thing to draw a downwardsloping demand curve and announce that this represents the situation in a monopoly market. It is quite another to determine whether a firm which appears to have a large market share, but where there are, say, a number of much smaller competitors as well as producers making apparently similar products, actually ‘dominates’ the market, with harmful results. We approach this transition in two stages. First, in Section II below, we look at two indices of market dominance and assess their usefulness for highlighting the issues involved and for direct application to policy. The measures chosen are the Lerner index of market power and the Bain index of ‘excess’ profits.1 Both have been discussed extensively in the present context, and the latter has been the subject of a great deal of...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.