How Costly Is Rising Market Power for the U.S. Economy?
Economic Brief
July 2023, No. 23-24
How Costly Is Rising Market Power for the U.S. Economy?
By Chen Yeh
We survey the recent, active debate on market power in the U.S. economy. While typical studies on market power focused on narrow industries due to data constraints, the relevance of market power for the aggregate economy was reinvigorated by a study focusing on publicly traded firms that documented a significant rise in U.S market power since the 1980s. This article is meant to provide a bird's-eye view of the (sometimes heated) discussion on market power. Furthermore, we examine the macroeconomic consequences of a rise in U.S. market power.
While economists are fully aware of the qualitative ramifications of market power, there are surprisingly few studies that try to quantify it. In this article, we survey the recent, active debate on market power and explore the implications of rising market power for the U.S. economy. We do so by first reviewing the study that documented a significant rise in U.S. market power since the 1980s. This study ignited the debate on market power, leading to many follow-up studies and criticism.
Excerpt: For an economy to achieve efficiency, it needs to be perfectly competitive. Only under this specific case are goods and services produced and sold at the lowest possible price. In the absence of perfect competition, however, resources are not allocated optimally, and consumers face higher prices due to firms exerting their market power. As a result, high levels of market power could have devastating consequences for welfare and inequality.
https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-24
( The brief is somewhat long but not boring. How greed works is systematic and pervasive. )
SWBTATTReg
(22,174 posts)whole article.
elleng
(131,176 posts)'high levels of market power could have devastating consequences for welfare and inequality.'
SWBTATTReg
(22,174 posts)resource constraints etc., but greed, 'hey, lets increase the prices because we can!'.
And I suspect that this is worse than in prior years being that the tax codes for the wealthy has been stripped down, thus, more dollars to the bottom line means more money in the wallets of these companies, the 1%ers.
orthoclad
(2,910 posts)In the US, money=power, and its commutative.
BeckyDem
(8,361 posts)The Supreme Court has defined market power as "the ability to raise prices above those that would be charged in a competitive market," 8 and monopoly power as "the power to control prices or exclude competition." 9 The Supreme Court has held that "[m]onopoly power under § 2 requires, of course, something greater than market power under § 1."10 Precisely where market power becomes so great as to constitute what the law deems to be monopoly power is largely a matter of degree rather than one of kind. Clearly, however, monopoly power requires, at a minimum, a substantial degree of market power.11 Moreover, before subjecting a firm to possible challenge under antitrust law for monopolization or attempted monopolization, the power in question is generally required to be much more than merely fleeting; that is, it must also be durable.12
https://www.justice.gov/atr/monopoly-power-and-market-power-antitrust-law