Document Type
Discussion Paper
Publication Date
7-1-2004
CFDP Number
1466R
CFDP Revision Date
2004-08-01
CFDP Pages
14
Abstract
An applied general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopoly pricing current in antitrust economics. This analysis introduces a new notion of market equilibrium where firms with monopoly power are cost-minimizing price-takers in competitive factor markets and make supracompetitive profits in equilibrium, i.e., the monopoly price exceeds the marginal cost of production. We assume that the primary goals of antitrust policy are the promotion of competition and the enhancement of consumer welfare. To that end, we use Debreu’s coefficient of resource utilization to determine the counterfactual competitive price levels in monopolized markets and then impute the economic costs of monopolization.
Recommended Citation
Brown, Donald J. and Wood, G. A., "Competition, Consumer Welfare and Monopoly Power" (2004). Cowles Foundation Discussion Papers. 1744.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1744