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The Dominant Firm Revisited

Author

Listed:
  • Timothy J. Tardiff
  • Dennis L. Weisman

Abstract

This paper presents a framework for evaluating whether a firm lacks dominance in a particular market despite manifesting relatively high market shares. We show that demand complementarities and high price–cost margins combine with multi-market participation to reduce the significance of market share in drawing inferences about dominance. We further show the equivalence between this multi-market measure of market power and the critical elasticity for the dominant firm. These findings suggest that the use of traditional (single-market) measures of market power commonly used to infer dominance can lead policymakers to maintain regulatory oversight when market forces are sufficient to provide the requisite degree of “competitive” discipline.

Suggested Citation

  • Timothy J. Tardiff & Dennis L. Weisman, 2009. "The Dominant Firm Revisited," Journal of Competition Law and Economics, Oxford University Press, vol. 5(3), pages 517-536.
    • Handle: RePEc:oup:jcomle:v:5:y:2009:i:3:p:517-536.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhp002
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    Citations

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    Cited by:

    1. Erik BOHLIN & Kevin W. CAVES & Jeffrey A. EISENACH, 2014. "Mobile Wireless Performance in the EU and the US: Implications for Policy," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(93), pages 35-58, 1st quart.
    2. Thomas Hazlett & Dennis Weisman, 2011. "Market Power in US Broadband Services," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 151-171, March.
    3. Sumit K. Majumdar, 2011. "Cross Subsidization And Telecommunications Sector Wages," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(1), pages 1-24, March.
    4. Daigyo Seo & Allen Featherstone & Dennis Weisman & Yuan Gao, 2010. "Market Consolidation and Productivity Growth in U.S. Wireline Telecommunications: Stochastic Frontier Analysis vs. Malmquist Index," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(3), pages 271-294, May.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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