Title

The Social Cost of Monopoly Power

Document Type

Discussion Paper

Publication Date

5-1-2004

CFDP Number

1466

CFDP Pages

24

Abstract

A general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopolization common to most antitrust texts. This analysis introduces the notion of a cost minimizing market equilibrium. The empirical implications of this equilibrium concept for antitrust policy is derived in terms of a family of equilibrium inequalities over market data from observations on a market economy with competitive factor markets. The social cost of monopoly power is measured using Debreu’s coefficient of resource utilization. That is, we propose Pareto optimality as the ultimate objective of antitrust policy.

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