Competition Is (Still) a Tough Weed: A Review Essay of Thomas Philippon’s the Great Reversal

21 Pages Posted: 20 May 2020

Date Written: April 23, 2020

Abstract

In The Great Reversal, Philippon makes the case that competition in America has weakened during the past two decades. His book contributes to the rapidly developing literature on the macroeconomic consequences of market power. I argue that Philippon fails to convincingly support his hypothesis because (1) he does not consider competition as a process operating on several margins, with the price being only of them, (2) The available empirical data does not unambiguously show a rise in market power. Philippon's work suffers from similar flaws as the "structure-conduct-performance" paradigm. I also review the recent attempts to estimate aggregate market power and explain why the methods used for such estimations are calculated by making assumptions over which margins entrepreneurs compete and suffer from serious knowledge problems. Finally, I offer an alternative view of competition which focuses on how and at what speed rents are being dissipated instead of the markup of price over marginal cost.

Keywords: Market process, Anti-trust, competition

JEL Classification: L40, B53

Suggested Citation

Rouanet, Louis, Competition Is (Still) a Tough Weed: A Review Essay of Thomas Philippon’s the Great Reversal (April 23, 2020). Available at SSRN: https://ssrn.com/abstract=3583586 or http://dx.doi.org/10.2139/ssrn.3583586

Louis Rouanet (Contact Author)

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

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