Comments on: Josh Wright on Independent Ink and Price Discrimination http://www.antitrustreview.com/archives/334 News and commentary about antitrust, economics, technology, policy Thu, 20 Nov 2008 08:52:58 +0000 http://wordpress.org/?v=2.2 By: Antitrust Review » Market Power or Monopoly Power? A Response to Josh Wright http://www.antitrustreview.com/archives/334#comment-750 Antitrust Review » Market Power or Monopoly Power? A Response to Josh Wright Thu, 02 Mar 2006 18:24:13 +0000 http://www.antitrustreview.com/archives/334#comment-750 <p>[...] In this comment to my earlier post, Josh Wright differentiates between market power and monopoly power. The former is a firm’s power over its own price as expressed by a downward sloping demand curve. The latter means power over the market price. Antitrust, Josh argues, should focus on monopoly power not market power, because the latter is ubiquitous and more often than not harmless from a consumer welfare point of view. Monopoly power, in contrast, is a necessary predicate for consumer overcharges. [...]</p> […] In this comment to my earlier post, Josh Wright differentiates between market power and monopoly power. The former is a firm’s power over its own price as expressed by a downward sloping demand curve. The latter means power over the market price. Antitrust, Josh argues, should focus on monopoly power not market power, because the latter is ubiquitous and more often than not harmless from a consumer welfare point of view. Monopoly power, in contrast, is a necessary predicate for consumer overcharges. […]

]]> By: Joshua Wright http://www.antitrustreview.com/archives/334#comment-749 Joshua Wright Thu, 02 Mar 2006 16:30:47 +0000 http://www.antitrustreview.com/archives/334#comment-749 <p>I forget to sign my name to the last comment. Sorry.</p> I forget to sign my name to the last comment. Sorry.

]]> By: Anonymous http://www.antitrustreview.com/archives/334#comment-748 Anonymous Thu, 02 Mar 2006 15:56:40 +0000 http://www.antitrustreview.com/archives/334#comment-748 <p>Hanno, this is exactly my point. Price discrimination is evidence of market power in the sense that economists typically use the term. Market power = discretion over one's own price, i.e. a downward sloping demand curve. The focus of antitrust should be the exercise of monopoly power, i.e. control over the market price. These are two different phenomena. </p> <p>If antitrust market power simply means a downward sloping demand curve, power over one's one price, of course the inference that market power leads to anticompetitive effects is incorrect. This is the fundamental point of the Klein and Wiley piece that I cite in my post.</p> <p>One way to deal with this problem is to attack the symptom: figure out the conditions under which the inference is correct and only make the inference when those conditions are satisfied.</p> <p>But the better way is to address the root of the problem, the confusion between market power (downward sloping demand) and monopoly power (power over market price). The former is ubiquitous in competitive markets. The latter is a necessary condition for anticompetitive harm.</p> <p>Why not does identify the necessary condition and forego use of this poor proxy for inferences of competitive effects altogether?</p> Hanno, this is exactly my point. Price discrimination is evidence of market power in the sense that economists typically use the term. Market power = discretion over one’s own price, i.e. a downward sloping demand curve. The focus of antitrust should be the exercise of monopoly power, i.e. control over the market price. These are two different phenomena.

If antitrust market power simply means a downward sloping demand curve, power over one’s one price, of course the inference that market power leads to anticompetitive effects is incorrect. This is the fundamental point of the Klein and Wiley piece that I cite in my post.

One way to deal with this problem is to attack the symptom: figure out the conditions under which the inference is correct and only make the inference when those conditions are satisfied.

But the better way is to address the root of the problem, the confusion between market power (downward sloping demand) and monopoly power (power over market price). The former is ubiquitous in competitive markets. The latter is a necessary condition for anticompetitive harm.

Why not does identify the necessary condition and forego use of this poor proxy for inferences of competitive effects altogether?

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