COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1466 The Social Cost of Monopoly Power Donald J. Brown and G.A. Wood May 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 |
