MARKET DOMINANCE AND ANTITRUST POLICY doc

[...]... however, a major task of the book is to show how economic analysis can be used to analyse 10 Market dominance and antitrust policy antitrust problems we need now to address the question of the relationship between the monopoly of economic theory and firms in antitrust cases in positions of market dominance By market dominance we mean the ability of a firm or group of firms persistently to hold price above... caused by market dominance pale into insignificance beside the improvements that come from a faster rate of growth and if such growth is a function of a degree of market dominance, the antitrust authorities have the formidable task of deciding how much dominance to allow Frequently antitrust issues may boil down to a trade-off between technical and X-efficiency, on the one hand, and allocative and innovative... (businessmen and tourists) or between different markets insulated from each other (the new equipment and the replacement market; the home and the foreign market) A firm with a degree of market dominance may be able to discriminate on price In the absence of such dominance the attempt will fail because of competition We argued above that many antitrust problems involve a possible conflict between technical and. .. efficiency is the legitimate concern of antitrust policy Secondly, what is the character and role of the impediment to entry in the market shown? Thirdly, what is the significance of the profits shown in the figure? And fourthly, what relation is there between the monopoly illustrated and firms in an antitrust case in a position of market dominance? Figure 1.1 Price and output under simple monopoly In... market dominance, there has been enormous controversy, both over the plausibility of his analysis and over the correct role of antitrust policy in such questions The efficiency concepts that we have introduced are also useful in illuminating this issue One conclusion was that a firm or group with market dominance would create resource misallocation through operating at ineffi- 18 Market dominance and. .. complex issues for antitrust policy because they involve a trade-off between different types of efficiency, usually, although not exclusively, between technical and dynamic efficiency on the one hand, and allocative and X-efficiency, on the other One way of looking at antitrust policy, therefore, is as an attempt to reconcile these different types of efficiency III The costs of market dominance We have... enter the market at prices between PC and PM have their demands satisfied by the monopolist, whereas they would have remained uncatered for by the competitive industry.6 As far as allocative efficiency is concerned the answer to the question is more 14 Market dominance and antitrust policy £ LRMC' PC A SC E PM LRAC F LRMC AR MR 0 QN QC QM Output Figure 1.2 Price and output under competition and monopoly... that may result from market dominance It is convenient to start with a slightly modified 20 Market dominance and antitrust policy Figure 1.1 In Figure 1.4 we assume that costs remain constant over the entire output range The line AF can be interpreted initially as the supply curve of a competitive industry (with input prices invariable with industry output) Given that market demand is AR, then under... correct market is very wide and that consequently their dominance is relatively small Complainants and antitrust authorities are likely to think otherwise and draw the boundaries more narrowly One approach which has received much attention but which in practice may be very difficult to employ involves the use of cross-elasticity of demand and elasticity of supply The cross-elasticity of demand between... performance due to the ‘wrong’ level of market dominance is generally lacking Indirect and piecemeal evidence, however, suggests that potentially the losses are considerable In short, the welfare losses from market dominance that antitrust policy tries to correct are likely to be substantial Economies that are successful in removing the worst effects of market dominance or preventing its emergence are . alt="" MARKET DOMINANCE AND ANTITRUST POLICY, SECOND EDITION Utton2 00 prelims 4/12/02 16:20 Page i For Mark and Harry Utton2 00 prelims 4/12/02 16:20 Page ii Market Dominance and Antitrust Policy, . 126 7 Market dominance and collusion 149 8 Horizontal mergers and market dominance 171 PART III MARKET DOMINANCE: VERTICAL ISSUES 9 Vertical integration and vertical mergers 207 10 Market dominance. policy in Europe and the United States 44 PART II MARKET DOMINANCE: HORIZONTAL ISSUES 4 The measurement and interpretation of market dominance 59 5 Market conduct of dominant firms: I 85 6 Market