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Market Structure, Concentration Indices and Welfare Cost


  • Tamunopriye J. Agiobenebo

    (University of Botswana, Gaborone, Botswana)


This paper revisited the analytics of the welfare significance of market imperfections using the industry concentration index. It reopened the issue of how best to measure the concentration index. Specifically, it developed a new market concentration index based on the Hirschman- Herfindahl concentration index that preserves all its known advantages as a full information industry concentration index. It also improved on its usefulness and applicability. In developing the new index the paper reviewed the development of the analytical principles and methodologies for the empirical measurement of the welfare or social cost of monopoly (market imperfections). In particular, it reviewed Cowling-Mueller (1981) extensively because the analytical framework they prescribed for the measurement of the welfare cost of oligopoly is misconceived and misleading. The new index is of great usefulness and wide applicability and generalizes the welfare loss function to the entire market structure spectrum.

Suggested Citation

  • Tamunopriye J. Agiobenebo, 2004. "Market Structure, Concentration Indices and Welfare Cost," Industrial Organization 0406011, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0406011
    Note: Type of Document - pdf; pages: 16

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    References listed on IDEAS

    1. Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, vol. 44(176), pages 369-380, November.
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    Cited by:

    1. Wu, Gang & Wei, Yi-Ming & Fan, Ying & Liu, Lan-Cui, 2007. "An empirical analysis of the risk of crude oil imports in China using improved portfolio approach," Energy Policy, Elsevier, vol. 35(8), pages 4190-4199, August.
    2. Orbeta, Aniceto Jr. C. & Abrigo, Michael Ralph M., 2009. "Philippine International Labor Migration in the Past 30 Years: Trends and Prospects," Discussion Papers DP 2009-33, Philippine Institute for Development Studies.
    3. Ge, Fenglong & Fan, Ying, 2013. "Quantifying the risk to crude oil imports in China: An improved portfolio approach," Energy Economics, Elsevier, vol. 40(C), pages 72-80.

    More about this item


    market power; market imperfections; industry concentration indices; Hirschman-Herfindahl concentration index; Agiobenebo-Hirschman- Herfindahl index; welfare cost of market imperfections;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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