Abstract
This paper analyzes how market power can be measured in an industry characterized by significant technological progress. Using a Cournot’s oligopolistic framework with exogenous innovation and costly investment in new technology, It shows that the Lerner index and the Herfindahl-Hirschman Index (HHI) overestimate firms’ market power. It thus proposed new versions of these measures that accounts for investment in new technologies. The theoretical prediction is supported by an empirical evidence from the mobile telecommunications industry showing that investment in a new technology is positively correlated with the Lerner index and the HHI prior to innovation. The application of the new versions of the Lerner index and the HHI shows that they performs better in capturing a change in the market power.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
