Market power, Sherman Act, Monopoly power, Market share, Cellophane fallacy
Antitrust and Trade Regulation | Law and Economics
The concept of market power is at the core of antitrust. Philosophically, antitrust policy is aimed primarily at preventing firms from achieving, retaining, or abusing market power. Operationally, assessing whether a firm or firms have market power or any reasonable prospect for achieving it is often the first (and sometimes, the only) step in performing an antitrust analysis.
Few would dispute that market power should play a prominent role in antitrust analysis. Nevertheless, important questions remain. Some of these questions quite naturally focus on the precise degree of importance given to market power. Is it an essential ingredient in antitrust cases, or merely one of several factors to be taken into account? And does the answer to those questions depend on the kind of case we are considering?
Other questions involve how one determines whether market power exists in a particular situation. Interestingly, however, disputes about the existence of market power frequently are not simply empirical skirmishes, in which one economist's estimate of cross-elasticity is pitted against that of another. Rather, the debate often goes to the very concept of market power, i.e., what is the economist attempting to measure and what factors are properly considered in assessing whether market power exists?
This article highlights some of these basic questions about the definition and measurement of market power and the role that market power should play in antitrust cases, and sets forth some thoughts on how we might begin to answer some of those questions. The article is intended to be selective rather than exhaustive, and provocative rather than authoritative. My goal is to advance the debate, not end it.
Hay, George A., "Market Power in Antitrust" (1992). Cornell Law Faculty Publications. 1158.
George A. Hay, "Market Power in Antitrust", 60 Antitrust Law Journal (1991-1992)