Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, February 12, 2009

The Dominant Firm Revisited

Posted by D. Daniel Sokol

Timothy J. Tardiff (Huron Consulting Group) and Dennis L. Weisman (Kansas State Economics) provide their analysis on The Dominant Firm Revisited.

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.

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