Identifying Market Power in Times of Constant Change
17 Pages Posted: 3 Apr 2017
Date Written: August 15, 2017
We explain that traditional approaches to defining markets to investigate market power fail in times of rapid technological change because demand and supply are in constant flux. Currently, empirical analyses of markets rely upon historical data, the value of which degrades over time, possibly resulting in harmful regulatory decisions. This points to a need for a different approach to determining when regulation is an appropriate response to market power. We present an approach that relies upon essential factors leading to monopoly (EFs), such as control of essential resources, which persist across generations of products. Market power analyses should be a search for EFs and policy responses should focus on diffusing the market power without destroying value. Our research constructs a theoretical model to illustrate the decay problem and the value of the EFs approach, and uses the telecommunications industry to illustrate our approach.
Keywords: Competition, Market Power, Regulation, Antitrust
JEL Classification: L12, L43, L51, L86, L96
Suggested Citation: Suggested Citation