New market power measure reduces errors in antitrust decisions
The article explores how to measure market power in multiple markets by introducing the concept of effective market share. The researchers found that traditional measures can overstate or understate market power depending on the relationship between products. They also discovered that cost complementarities can reduce a dominant firm's market power. Additionally, errors in measuring market power tend to lead to false conclusions about its presence. Effective market shares help make more accurate judgments in merger and deregulation cases.