Template-type: ReDif-Paper 1.0
Author-Name: Bos Jaap W.B. 
Author-Name: Ling Chan Yee 
Author-Name: Kolari James W 
Author-Name: Yuan Jiang 
Author-workplace-name: METEOR
Title: Competition and Critical Mass
Abstract: Empirical literature and related legal practice using concentration as a proxy for competition measurement are prone to a fallacy of division, as concentration measures are appropriate for perfect competition and perfect collusion but not intermediate levels of competition. Extending the classic Cournot-type competition model of Cowling and Waterson (1976) and Cowling (1976) used to derive the Hirschman-Herfindahl Index (HHI) of market concentration, we propose an adaptation of this model that allows collusive rents for all, none, or some of the firms in a market. Application of our model and new critical mass measures to data for U.S. commercial banks in the period 1984-2004 confirms that concentration measures are unreliable competition metrics. Our results lead us to conclude that critical mass is a promising new market power metric for competition analyses. Policy and future research implications are briefly discussed.
Keywords: microeconomics ; 
Series: Research Memoranda
Creation-Date: 2010
Number: 063
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:01fb0f3c-d337-4836-9cae-2bd3f9817870/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 494228
Handle: RePEc:unm:umamet:2010063