Competition, Consumer Welfare and Monopoly Power

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Competition, Consumer Welfare and Monopoly Power

Author Info

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

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Donald Brown

Abstract

An applied general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopoly pricing current in antitrust economics. This analysis introduces a new notion of market equilibrium where firms with monopoly power are cost-minimizing price-takers in competitive factor markets and make supracompetitive profits in equilibrium, i.e., the monopoly price exceeds the marginal cost of production. We assume that the primary goals of antitrust policy are the promotion of competition and the enhancement of consumer welfare. To that end, we use Debreu's coefficient of resource utilization to determine the counterfactual competitive price levels in monopolized markets and then impute the economic costs of monopolization.

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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1466R.

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Length: 14 pages
Date of creation: May 2004
Date of revision: Aug 2004
Handle: RePEc:cwl:cwldpp:1466r

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

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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

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-02-13 (All new papers)
NEP-COM-2005-02-13 (Industrial Competition)
NEP-IND-2005-02-13 (Industrial Organization)
NEP-MIC-2005-02-13 (Microeconomics)

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This page was last updated on 2010-1-5.

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