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The Misuse Of Profit Margins To Infer Market Power

Author

Listed:
  • Robert H. Bork
  • J. Gregory Sidak

Abstract

Profit margins are not reliable evidence from which to infer market power in antitrust cases. The use of accounting profit margins has no economic justification in dominance proceedings. Its use can increase the frequency and magnitude of enforcement errors. To illustrate, we examine the case of Telcel, which Mexican regulators declared dominant in mobile telephony on the basis of Telcel's profit margins. We show that, to the contrary, Telcel's margins were actually within the bounds of regularly observed profit margins in the telecommunications industry.

Suggested Citation

  • Robert H. Bork & J. Gregory Sidak, 2013. "The Misuse Of Profit Margins To Infer Market Power," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 511-530.
    • Handle: RePEc:oup:jcomle:v:9:y:2013:i:3:p:511-530.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht024
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    Citations

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    Cited by:

    1. Tatyana Chaika, 2018. "Проблеми Формування Системи Порівнянних Показників Прибутковості Підприємств Країн-Членів Оеср І України [Problems of Forming the System of Comparable Indicators of Profitability of Enterprises of ," Traektoriâ Nauki = Path of Science, Altezoro, s.r.o. & Dialog, vol. 4(4), pages 6001-6012, April.
    2. Dmytro Osiichuk & Paweł Wnuczak, 2023. "Do Corporate Consolidations Affect the Competitive Positioning of Non-Financial Firms in China?," SAGE Open, , vol. 13(4), pages 21582440231, December.
    3. Liberty Mncube, 2014. "The South African Wheat Flour Cartel: Overcharges at the Mill," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 487-509, December.

    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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