Work

Effective Market Power and Welfare Loss

Year: 2024

Type: article

Abstract: ABSTRACT This paper introduces a straightforward and effective estimation methodology for quantifying firm‐level welfare losses attributable to market power in monopolistic competition markets. Our analysis underscores that welfare losses are primarily contingent on effective market power, expressed as the product of the Lerner index and market share. Furthermore, our study demonstrates that welfare loss computed using the Hicksian measurement is smaller than that obtained through the Marshallian measurement. Finally, we apply this methodology to estimate firm‐level market power and welfare losses in the Chinese carbonated beverage industry.

Source: Australian Economic Papers

DOI: 10.1111/1467-8454.12386

Authors: Zhongqi Deng, Yue Luo, Cailin Yang, Xuecheng Fan

Institution: Sichuan University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funders: National Office for Philosophy and Social Sciences, National Social Science Fund of China

Award: G8119443250