Concrete Threats: Inferring Market Power Under The Threat Of Entry

Curtailing anti-competitive behavior has long been a major concern of economic policymakers. By attempting to limit companies' use of illegally obtained market power, antitrust authorities hope to make markets work more efficiently, thereby allowing a greater number of consumers to participate as competition drives prices down. The crucial issue for antitrust authorities, then, is how to measure "Market power," also known as "Price minus (economic) cost margin," where the costs considered are economic costs rather than book values. Higher price-cost margins in an industry reflect more market power.