Conventional neoclassical views of dominance are generally restricted to a concern for a firm's market power seen in terms of the ability to raise and maintain prices above their marginal costs of production. A prime example of this approach is the application of dominant firm price leadership models, which has led to a restricted theoretical perception of the nature of market power and to an incomplete view of the social costs of monopoly power. This paper argues that a broader conception of a firm's market power leads to a quite different perspective on its conduct. In particular, if we allow dominance to involve the ability to influence product demand patterns, then the theoretical analysis of firm behaviour changes significantly. Specifically, it implies the endogeneity of preferences which, it is argued, represents an important alternative to mainstream analysis. It is suggested that we need to consider a firm's dominance not so much in terms of its pricing in the context of a particular market structure but to focus on its ability to gain advantage over its rivals in terms of 'creating' an asymmetry in the demand for its products. This has important implications for competition policy, for it suggests a need to concentrate on the 'power' of firms and less on the effects of a change in market structure. Likewise, we need to reconsider the adequacy of defining markets in terms of product demand characteristics.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2000) Issue (Month): 1 (January) Pages: 73-87 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: