Research And Analysis Of A Monopoly/Oligopoly Market
Essay by 24 • March 27, 2011 • 693 Words (3 Pages) • 1,541 Views
transportation costs are insignificant, the
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geographic market is frequently defined as the entire nation. Or where a firm and its
rivals sell their product only in a limited geographic area and their customers have no
ready access to an outside source of supply, the general rule has been to define the
geographic market as that particular area and to include only the sales made within the
market. Where the seller's geographic market is less certain, attention is paid not only to
actual sales patterns but also to price relationships and movements in different areas. In
sum, the relevant geographic market in competition analysis is that "section of the
country" where a firm can increase its price without attracting new sellers or without
losing many customers to alternative suppliers outside that area.
(2) Market Structure and Market Power
Required Statistical Information
* Market Share of Each Concerned Firm in Each Geographical Market
* Average Market Shares in Each Geographical Market
* Four-Firm Concentration Levels and HHI
* Industry Price-Cost Margin
* Price Cost Margin by Each Concerned Firm
* Imports of Concerned Goods
(a) Market Share
Market shares are antitrust's chief tool for assessing the competitive significance of
firms in the relevant market. Market shares most often are calculated by setting the
concerned industries' historical output (measured in production units or sales) as the
numerator and then dividing that by the larger denominator constituting total production
or sales in the defined area.
(b) Concentration measures
To quantify oligopolitical concentration effects, the Herfinadahl-Hirschman Index
(HHI) for leading firms market share measures of concentration. The HHI is calculated
by summing the squares of the market shares of each firm in the market. For example,
in a market with ten firms which each account for 10 percent of sales, the HHI is 1000.
The HHI measures concentration in a way that reflects both the absolute level of
concentration and the significance of larger firms within the market.
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HHI in the US 1992 Merger Guidelines
The US 1992 Guidelines focus on shares and concentration data to create a
presumption of illegality (if the HHI is above 1800 and it is increased by more than 100
points) or legality (if the HHI is below 1000, or between 1000- 1800 and the increase is
less than 100).
In the prospected research, price-cost margin and the price elasticity of demand
in each concerned market need to be calculated to analyze the market structures.
(c) Market Entry Conditions
After considering market shares and concentration measures, market entry
conditions should be analyzed. Market shares are rarely evaluated market in isolation
when measuring the defendant's market power. Inferences from market shares typically
are qualified by factors such as entry conditions, the size and stability of market shares
over time. Of these factors, entry is often paramount. Where entry is easy, it become
difficult
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