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Journal of Competition Law and Economics Advance Access originally published online on February 5, 2009
Journal of Competition Law and Economics 2009 5(3):517-536; doi:10.1093/joclec/nhp002
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© The Author (2009). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

THE DOMINANT FIRM REVISITED

Timothy J. Tardiff * and Dennis L. Weisman **

Correspondence: E-mail: ttardiff{at}huronconsultinggroup.com

JEL: K21, L43, L51, L96

This paper presents a framework for evaluating whether a firm lacks dominance in a particular market despite manifesting relatively high market shares. We show that demand complementarities and high price–cost margins combine with multi-market participation to reduce the significance of market share in drawing inferences about dominance. We further show the equivalence between this multi-market measure of market power and the critical elasticity for the dominant firm. These findings suggest that the use of traditional (single-market) measures of market power commonly used to infer dominance can lead policymakers to maintain regulatory oversight when market forces are sufficient to provide the requisite degree of "competitive" discipline.

* Managing Director, Huron Consulting Group, Cambridge, MA, USA.

** Professor, Department of Economics, Kansas State University. E-mail: weisman{at}ksu.edu. The authors are grateful to the co-editor, J. Gregory Sidak, and participants at the 2008 International Telecommunications Society 17th Biennial Conference (Montreal, Canada, June 25, 2008) for constructive comments on an earlier draft of this paper. The usual caveat applies.


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