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The Social Cost of Monopoly Power

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Author Info
Donald J. Brown () (Cowles Foundation, Yale University)
G.A. Wood

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Abstract

A general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopolization common to most antitrust texts. This analysis introduces the notion of a cost minimizing market equilibrium. The empirical implications of this equilibrium concept for antitrust policy is derived in terms of a family of equilibrium inequalities over market data from observations on a market economy with competitive factor markets. The social cost of monopoly power is measured using Debreu's coefficient of resource utilization. That is, we propose Pareto optimality as the ultimate objective of antitrust policy.

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File URL: http://cowles.econ.yale.edu/P/cd/d14b/d1466.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1466.

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Length: 24 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:cwl:cwldpp:1466

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: Monopoly power; Antitrust economics; Applied general equilibrium analysis;

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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References listed on IDEAS
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  1. Brown, Donald J & Heal, Geoffrey M, 1983. "Marginal vs. Average Cost Pricing in the Presence of a Public Monopoly," American Economic Review, American Economic Association, vol. 73(2), pages 189-93, May. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Bertrand Crettez & Marie-Cécile Fagart, 2008. "Does entry improve welfare? A general equilibrium approach to competition policy," EconomiX Working Papers 2008-14, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
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This page was last updated on 2009-12-14.


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