A Generalized Index Of Market Power
AbstractThis paper analyses two approaches to measuring market power -the commonly used Lerner index and a range of exploitation measures-. It is argued that the Lerner index is designed to quantify market power from the supply side, and the exploitation measures are designed to quantify market power from the demand side, and that those two approaches do not always behave in a symmetric way, since they do not always have the same bounds. To sort out these potentially undesirable properties, this paper proposes a new general index to measure market power, which is symmetrical in the sense that it is bounded between cero and one, regardless of whether the market power comes from the supply or the demand side. The index proposed allows for the presence of more than one firm and for the existence of conjectural variations.
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Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 001916.
Date of creation: 30 Oct 2005
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Market Power; Mark Up; Mark Down; Lerner Index; Exploitation Measures; Industrial Organization; Conjectural Variations;
Other versions of this item:
- D49 - Microeconomics - - Market Structure and Pricing - - - Other
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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- Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
- Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-30, December.
- William M. Boal, 1995. "Testing for Employer Monopsony in Turn-of-the-Century Coal Mining," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 519-536, Autumn.
- William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
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