The Social Cost of Monopoly Power
25 Pages Posted: 30 Jul 2004
Date Written: July 2004
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.
Keywords: Monopoly power, Antitrust economics, Applied general equilibrium analysis
JEL Classification: D42, D58, D61, L12, L41
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