The Relative Burden of Monopoly on Households with Different Incomes (original) (raw)

The distributional effects of monopoly

This paper examines the relative burden of monopoly, measured using the equivalent variation, for different household income levels. The results indicate that, whatever the size of the absolute welfare loss due to monopoly, there may be a substantial effect on the distribution of welfare.

Monopoly Welfare Loss in the United Kingdom

The Manchester School, 1980

The dramatic rise in industrial concentration experienced by the British economy during the last thirty years raises the inevitable question of whether it is of any consequence.' This paper focuses on one narrow aspect of that question-namely whether the sllocative loss of monopoly/oligopoly is, in some sense, substantial. Many more substantive consequences, such as the political consequences of the centralization of decision-making, the redistribution of income resulting from a rise in the degree of monopoly, changes in industrial performance, etc., are not considered here, but would need to be brought into any full assessment of the consequences of the rise in concentration. TABLE I Summary of Estimotes of Monopoly Welfore Loss Author Estimote of Loss Cowling and Mueller (1978) Harberger (I 954) Kamerschen (1966) Schwartzman (1961) Siegfried and Tiemann (1974) Worcester (I 973) Notes: 3.86 per cent o f gross corporate product1 0.08 per cent of national income 5.4 t o 6.2 per cent o f national income2 0.13 per cent of national income 0.073 per cent of national income (i) 0.203 t o 0.440 per cent of national income (ii) 0.443 t o 0.728 per cent of national income3 (I) Estimate for U.K.; the corresponding estimate for the U.S.A. is 3.96 per cent. (2) This range is only one of a number given by Kamerschen, but is regarded by him as the most relevant. It is based on a variety of post-tax profit figures, and assumes profit maximizing behaviour by firms. (3) The second range incorporates an allowance for higher wage costs under monopoly.

Competition, Consumer Welfare, and the Social Cost of Monopoly

Lecture Notes in Economics and Mathematical Systems

Conventional deadweight loss measures of the social cost of monopoly ignore, among other things, the social cost of inducing competition and thus cannot accurately capture the loss in social welfare. In this Article, we suggest an alternative method of measuring the social cost of monopoly. Using elements of general equilibrium theory, we propose a social cost metric where the benchmark is the Pareto optimal state of the economy that uses the least amount of resources, consistent with consumers' utility levels in the monopolized state. If the primary goal of antitrust policy is the enhancement of consumer welfare, then the proper benchmark is Pareto optimality, not simply competitive markets. We discuss the implications of our approach for antitrust law as well as how our methodology can be used in practice for allegations of monopoly power given a history of price-demand observations. I.

Monopoly Di¤erential Pricing and Welfare

2013

A rm often desires to charge di¤erent prices for its product to distinct consumer groups based on their di¤erent demands or marginal costs of service. When only costs di¤er, monopoly di¤erential pricing generally raises both consumer and total welfare, compared to uniform pricing. Total welfare rises due to the output reallocation and quantity change e¤ects: The pass-through from marginal cost to monopoly price dictates that at least one of these two e¤ects must be positive (and dominate if the other is not), provided that demand satis es a minor curvature condition. Consumers gain in aggregate, because to reallocate output the rm must vary prices, creating price dispersion that entails no upward bias in average price. We also contrast these ndings with results under classic third-degree price discrimination, and provide su¢ cient conditions for bene cial di¤erential pricing when both demand and cost di¤er.

A welfare comparison of private and public monopoly

Journal of Public Economics, 1992

The cost function of a monopoly is C(q)=K +Oy. where U is unknown to the regulator. We evaluate various ownership and regulation regimes in terms of social welfare. determined by both the amount of total surplus and its distribution. Maximal welfare is achieved by the regulated public lirm when its bias IS pro-consumer, and :IISO when it is pro-worker and 0 is low enough. We compare an unregulated public lirm with ;1 prlvrtte one regulated li 1;~ Loeb-Mae;11 Baron-Myerson and characterize the frontier. in parumctcr space. where one or the other dominates. conccrncd with the contribution to total social wclfarc of the cntcrprisc, which can bc privately or publicly owned. If it is privatsly owned, it can bc rogul:~tcd or unrcgulatcd. If it is publicly owncd, it can also bc rcgulatcd or unrcgulatcd, and cvcn if it is not regul;ttcd. it can bc subsidized. Although the managcmcnt of the firm may consist of the same people (or will bc drawn from ;I class of pcoplc who make their livings as managers), it will bc subject to diffcrcnt pressures in the public and private rcgimcs: in the private GISL'. the managcmcnt answers to the stockholders. who seek to maximize profits, while in the public cast the managcmcnt responds to prcssurcs from the public. the public cmployccs' union, and the stats governing board. Our aim is to compare the social welfare achieved by regulating a private monopoly with the welfare achicvcd from operating it is a public firm. WC view the man;igcmcnt as maximizing the same 'fundamental' utility function Cr,rrr.sponcfr,~cv 10: J.E. Rocmer.

An Elasticity Measure of Welfare Loss in Symmetric Oligopoly

We derive a measure of welfare loss as a proportion of the value of sales under quantity-setting symmetric oligopoly in terms of the equilibrium industry price elasticity of demand, the number of firms in the industry and a conjectural variation term in the context of the standard linear model. This generalises the monopoly measure in James and McHardy (1997).

The Cost of Monopoly in Australian Manufacturing

The Australian Economic Review, 2001

In this article we present new estimates of the degree of welfare loss resulting from monopoly elements in Australian manufacturing. The measure suggested by Cowling and Mueller is modified to take into account the presence of oligopolistic firms, which are imperfectly collusive. One conclusion of our article is that the social costs of monopoly in Australia are likely to be substantially higher than previous estimates have suggested. We also look at the characteristics of the industries which have high ratios of welfare loss to turnover, and we estimate a simple econometric model of the welfare loss by industry. There appears to be a (weak) relationship between the size of the welfare loss and the degree of concentration in the industry.

The Social Costs of Monopoly: A Survey and an Evaluation

Akdeniz İİBF Dergisi, 2007

Existence of monopoly and its costs to societies have been intensely studied. However, there has been no clear view obtained yet. Studies of rentseeking approach of the public choice school even make the issue more interesting. This paper surveys from traditional Harberger's triangle approach of social costs of monopoly to the most recent studies and drive some conclusions from it.