Market Power, Efficient Market Power, and Welfare Losses
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| Title | Market Power, Efficient Market Power, and Welfare Losses
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| Author | Deng Zhongqi and Chen Yongjun |
| Organization | Renmin University of China |
| Email | zhongqideng@sina.com；chenyongjun@rbs.org.cn |
| Key Words | Market Power; Market Share; Welfare Loss; Efficient Market Power; Carbonated Beverage Manufacturing Industry |
| Abstract | With the formal implementation of China’s “antitrust law” in 2008, antitrust investigation in China has been advancing. But due to the availability of price and cost data, measuring market power and welfare loss is a problem in academic circles. This paper thus gives an innovative method with the aid of OP and SBM approaches, clarifies the relationship among market share, market power, and welfare loss, defines the efficient market power for the first time, shows that market power will always lead to welfare losses, and the relationship between welfare loss and efficient market power is approximate linear. We also carry out an empirical analysis using the firm-level data of China’s carbonated beverage industry, results show that: There is no obvious correlation between market share and market power, but an inverted U-shaped relationship between market power and welfare losses, so inferring welfare loss cannot only rely on market power or market share; enterprise's marginal output of labor helps to enhance market power and share, and thus leads to more welfare losses; enterprises who pay more attention to employee welfare tend to have smaller market power; state-owned enterprises although have no greater market power, lead to more welfare losses. Additionally, the two propositions of this paper make antitrust process more objective and reasonable. |
| Serial Number | WP962 |
| Time | 2015-11-24 |
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