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Monopoly: concept, conditions of existence, factors of monopoly power. Types of monopolies

For a perfectly competitive enterprise, the price is equal to marginal cost, and for an enterprise with market power, the price above marginal costs. Hence, the amount by which the price exceeds marginal cost (), can serve as a measure of monopoly (market) power. The Lerner index is used to measure the price deviation from marginal cost.

Lerner index: two ways to calculate

The indicator of monopoly power, the Lerner index, is calculated by the formula:

P is the monopoly price;
MC is marginal cost.

Since at , the ability of an individual firm to influence prices is equal to zero (P = MC), then the relative excess of prices over characterizes the presence of market power.

Rice. 5.11. Ratio of P and MC under monopoly and perfect competition

With pure monopoly in the hypothetical model, the Lerner coefficient is equal to the maximum value L=1. The higher the value this indicator the higher the level of monopoly power.

This coefficient can also be expressed in terms of the elasticity coefficient using the universal pricing equation:

(P-MC)/P=-1/Ed.

We get the equation:

L=-1/Ed,

where Ed is the price elasticity of demand for the firm's products.

For example, if the elasticity of demand E=-5 coefficient of monopoly power L=0.2. We emphasize once again that high monopoly power in the market does not guarantee high economic profits for the firm. Firm A may have more monopoly power than the firm B, but earn less profit if it has a higher average total cost.

Sources of Monopoly Power

The sources of monopoly power of any perfect competitor, as follows from the above formula, are related to factors that determine the elasticity of demand for the firm's products. These include:

1. Elasticity of the market(industry) demand on the firm's products (in the case of a pure monopoly, the market demand and the demand for the firm's products are the same). The firm's elasticity of demand is usually greater than or equal to the elasticity of market demand.

Recall that among the main factors that determine elasticity demand at a price, allocate:

the presence and availability of substitute goods on the market (the more substitutes, the higher the elasticity; with a pure monopoly, there are no perfect substitutes for a product, and the risk of a decrease in demand due to the appearance of its analogues is minimal);
time factor (market demand tends to be more elastic in long term and less elastic in the short run. This is due to the time lag of the consumer's reaction to price changes and the high probability of the appearance of substitute goods over time);
the share of spending on goods in the consumer budget (the higher the level of spending on goods relative to consumer income, the higher the price elasticity of demand);
the degree of saturation of the market with the product in question (if the market is saturated with any product, then the elasticity will be rather low, and vice versa, if the market is not saturated, then a price decrease can cause a significant increase in demand, i.e. the market will be elastic);
a variety of possibilities for using a given product (the more different areas of use a product has, the more elastic the demand for it. This is due to the fact that a price increase reduces, and a price reduction expands the scope of economically justified use of this product. This explains the fact that the demand for universal equipment, as a rule, is more elastic than demand for specialized devices);
the importance of the product for the consumer (essential goods ( toothpaste, soap, hairdressing) are usually price inelastic; goods that are not so important to the consumer and the acquisition of which can be delayed are characterized by greater elasticity).

2. Number of firms in the market. The fewer firms in the market, the greater the ability of an individual firm to influence prices, other things being equal. In this case, it is not just the total number of firms that matters, but the number of the most influential, with a significant market share, the so-called "major players". Therefore, it is obvious that if two large companies accounts for 90% of sales, and the remaining 20 - 10%, then the two large firms have a large monopoly power. This situation is called the concentration of the market (production).

3. Interaction between firms. The more closely interacting firms, the greater their monopoly power. Conversely, the more aggressively companies compete with each other, the weaker their ability to influence market prices. An extreme case, a price war, can push prices down to competitive levels. Under these conditions, the individual firm will be wary of raising its price lest it lose its market share, and thus will have minimal monopoly power.

9.4. Methods for determining monopoly power and competitiveness of economic entities

In the economic literature, there is great interest in defining competitiveness and, therefore, the limits of influence or "power" of subjects in the economic space. Economic theory textbooks offer economic and mathematical models for determining monopoly power, market concentration, and the degree of power over price in an oligopoly.

The author of the measurement of monopoly power is the English economist A. Lerner, who proposed in the 30s of the twentieth century a formula for determining this indicator, where it is called the Lerner index.

A. Lerner noted that “it is this ... formula that I want to propose as an indicator of monopoly power. If R= price and WITH= marginal cost, then the index of the degree of monopoly power has the form ( R – WITH)/R". V educational literature this degree of monopoly power is denoted by ; price - ; marginal cost and in general the formula looks like this:

The Lerner index () must be between 0 and 1. According to this formula, it can be noted that the greater the gap between and , the greater the degree of monopoly power.

The definition of monopoly power according to the above formula by A. Lerner seems to be incorrect to some extent. Since in this case the influence and participation of other entities operating in a single economic space, where they are all competitors, seeking to expand their field of action and increase their share of power, is not taken into account. The definition of monopoly power without taking into account competitors is meaningless, since power is over someone.

Here it is necessary to clarify the content of the concept of "monopoly power". On the basis of what it is necessary to engage in the selection of a mathematical apparatus to identify the parameters of the domination of monopoly power. By monopoly power one must understand: firstly, the dominant position of the subject in the economic space among competitors and be a leader; secondly, regulation by monopoly prices, at which the bulk of goods would be sold; third, scaling up economic activity; fourthly, strengthening competitiveness by improving product quality, reducing prime cost and transaction costs; fifthly, an increase in the degree of the coefficient of reduction of individual costs to the socially necessary value, which characterizes the average level of technical equipment and manufacturability of the organization.

Here we note that monopoly power must be determined on the basis of indicators characterizing the interaction of competitors in a single economic space. These indicators include the gross revenue of the monopolist ( Pm) for a certain period of time (quarter, half year, year), the total cost ( C m) of this corporation (firm), gross profit (∑ R) received by all subjects in the economic space.

The gross revenue of a monopolist shows in value terms the total volume goods sold or services, thereby characterizing their own share in the total turnover. At the same time, to determine the monopoly power, the amount of profit received is necessary, since the power itself depends on it. Only profit allows expanding the scale of economic activity, investing and updating production, and reducing the niches of competitors. This resulting monopoly profit ( R m) can be calculated from the difference from the gross revenue of the monopolist ( Pm) and the sum of the costs of this firm ( C m), that is, it will look like this: R m = Pm – C m. (61)

However, to define monopoly power ( L) must take into account the influence of competitors. This can be represented as the ratio of monopoly profit to the profit of all participants (∑ R) competition for the same period or expressed in this form:

. (62)

In the form of A. Lerner's definition of monopoly power, the ratio of the price difference and marginal costs to price does not reflect the relationship of competitors, while according to formula (47) the ratio of monopoly profit to the total profit received by all competitors reveals the share of profit of monopolists, which quantitatively characterizes monopoly power . However, for the completeness of the definition of monopoly power, it is necessary to identify the share of sales or gross revenue of the monopolist in the total volume.

In the economic literature, according to some authors, the Herfindahl index allows you to determine the degree of power and market concentration () based on the share of sales ():

. (63)

However, in this Herfindahl formula in the definition of monopoly power, there is no direct relationship between profits as the final results of competitors, and indirectly shows the mutual influence and relationship between the share of profits and revenue from total sales. Therefore, taking into account the shortcomings mentioned above, the following economic and mathematical models are proposed for determining the total monopoly power () and the totality of the share of influence of other market entities ().

To determine () the index of complete monopoly power, taking into account the share of monopoly profit and revenue from total sales, it is necessary to identify the share of sales of a monopolist or business entity (). Below is the formula for its definition:

where is the revenue of the monopolist; - total revenue of business entities, including the monopolist. Now it can be determined by the following formula: . (65)

Based on the determination of the index of complete monopoly power, taking into account the share of monopoly profit and revenue from total sales (), it is possible to identify the totality of the share of influence of other market entities. (): . (66)

where is the index of the total power of the non-monopoly first firm, and so on is the index of the total power of the non-monopoly n ( n) firms in an integrated form. Further, taking into account the above material, formula (53) will be represented in the following form: (68)

Determining the parameters of the influence of the power of subjects in the economic space characterizes the competitiveness of firms on the basis of taking into account the share of profits and revenues relative to their total volume. This approach follows from the external manifestation of the performance of firms. However, it will not be complete if we do not take into account the potential possibility or state of the subjects, based on determining the level of their technical equipment and manufacturability, that is, taking into account the ratio of embodied and living costs to socially necessary values.

Thus, in order to determine the power of economic entities, it is necessary to calculate the shares of profits and revenues based on their total volume, which, together with taking into account the coefficient of reduction of individual costs to socially necessary values, characterizes the overall competitiveness of firms.

Concepts and terms

monopoly power; monopoly profit; market concentration; firms' competitiveness.

Issues under consideration

1. The essence of monopoly power.

2. Competitiveness of economic entities and methods of its determination.

Questions for seminars

1. Criteria for evaluating monopoly power.

2. The value of determining the competitiveness of subjects in a market economy.

Exercises

Answer the questions and determine the type of problem (scientific or educational), justify your point of view, identify a system of problems on the topic.

1. What is the difference and identity of the monopoly power of business entities and the state?

2. Do the criteria for determining the monopoly power and competitiveness of economic entities meet the requirements for improving the practice of public management?

Topics for abstracts

1. Definition of monopoly power in the improvement of public management.

2. Development of competitiveness of subjects in expanding the parameters of economic activity.

Literature

1. Course of economic theory / Under the general editorship. Chepurina M.N., Kiseleva E.A. - Kirov, 1998.

2. Abba P. Lerner. The concept of monopoly and the measurement of monopoly power. Review of Economic Studies.1934. (one). P. 157-175.

3. Ainabek K.S. Dialectics of the market economy. - Astana, 2001.

Monopoly- this is the exclusive right of the state, enterprise, organization, trader (belonging to one person, group of persons or the state) to carry out any economic activity. Monopoly is the exact opposite of a competitive market. By its very nature, monopoly acts as a force that undermines free competition, the spontaneous market.

Often, a monopoly means a certain structure of the market, the absolute predominance of a sole supplier or seller on it.

It assumes the following conditions are met:

1) the monopolist is the only producer of this product;

2) the product is unique in the sense that it has no close substitutes;

3) the penetration of other firms into the industry is closed by a number of circumstances, as a result of which the monopolist keeps the market in its full power and completely controls the volume of output;

4) the degree of influence of the monopolist on the market price is very high, but not unlimited, because he cannot set any arbitrarily high price (any company, including a monopoly, faces the problem of limited market demand and a reduction in sales in direct proportion to price increases) .

monopoly power is the ability to charge a price above marginal cost, and the amount by which price exceeds marginal cost is inversely proportional to the elasticity of demand for the firm. The less elastic the demand for a firm, the more monopoly power the firm has.

The ultimate cause of monopoly power is therefore the elasticity of demand for the firm. The question is why some firms (for example, a number of supermarkets) face a more elastic demand curve, while others (for example, a clothing manufacturer with a branded label) a less elastic demand curve.

Three factors determine the elasticity of demand for a firm. First is the elasticity of market demand. The firm's own demand will be at least as elastic as market demand, and therefore the elasticity of market demand limits the potential for monopoly power. Second factor is the number of firms in the market. If there are many firms on it, it is unlikely that one of the firms will be able to significantly affect the price. Third factor is the interaction between firms. Even if there are only two or three firms in the market, none of them will be able to increase the price many times over if the competition between them is aggressive, with each firm trying to capture the lion's share of the market. Let's look at each of these three factors that determine monopoly power.

For a perfectly competitive firm, price is equal to marginal cost, but for a firm with market power, price is greater than marginal cost. Therefore, the amount by which the price exceeds the marginal cost () can serve as a measure of monopoly (market) power. The Lerner index is used to measure the price deviation from marginal cost.

The indicator of monopoly power, the Lerner index, is calculated by the formula:

§ P -- monopoly price;
§ MC -- marginal cost.

Since, under perfect competition, the ability of an individual firm to influence prices is zero (P = MC), the relative excess of price over marginal cost characterizes the presence of monopoly or market power in a particular firm.

Fig.1.

With pure monopoly in the hypothetical model, the Lerner coefficient is equal to the maximum value L=1. The higher the value of this indicator, the higher the level of monopoly power.

This coefficient can also be expressed in terms of the elasticity coefficient using the universal pricing equation:

We get the equation:

where Ed is the price elasticity of demand for the firm's products.

For example, if the elasticity of demand E=-5 coefficient of monopoly power L=0.2. It should be emphasized that high monopoly power in the market does not guarantee high economic profits for the firm. Firm A may have more monopoly power than firm B but earn less profit if it has a higher average total cost.

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Measuring the firm's monopoly power

Introduction

1. Monopoly power: concept, essence, sources and types

2. Characteristics of indicators for measuring the monopoly power of a firm

Conclusion

Bibliography

Introduction

monopoly power economic closed

In the modern world, against the backdrop of the development of various markets, it is customary to talk about perfect competition as the only tool for achieving growth and prosperity.

However, perfect competition practically does not exist in any of the markets. Therefore, the concept of monopoly should be distinguished.

In a perfectly competitive market, there are many sellers and buyers, and therefore no single seller or buyer has a significant impact on the price. Most agricultural markets are close to perfectly competitive markets. For example, thousands of farmers grow wheat, which is bought by thousands of buyers.

As a result, no farmer and no buyer can significantly affect the price of wheat.

Many other markets are sufficiently competitive to be considered perfectly competitive markets. The global copper market, for example, has several dozen suppliers. This is enough that if one of the suppliers goes out of business, the impact on the price would be negligible.

In addition to markets of perfect competition, there are markets of imperfect competition. Such (imperfect) competition can exist in conditions of monopoly, oligopoly, monopsony. We will try to focus on the concept of "monopoly" in our work.

Problems of monopolization of economic life, competition for commodity markets today attract close attention not only of specialists, but also of the general population.

The main purpose of this control work- studying the measurement of monopolistic power of the firm.

Main tasks:

Define monopoly and monopoly power to identify its advantages and disadvantages.

To study the measures of the firm's monopoly power.

1. Monopoly power: concept, essence, sources and types

Monopoly is a market structure in which one firm is the sole producer of a product for which there are no close substitutes. Consider the characteristics of a pure monopoly.

the only seller. A pure or absolute monopolist is an industry consisting of a single firm that is the sole producer of a given product or the sole provider of a service; therefore, in this case, the words "firm" and "industry" are synonymous.

there are no close substitutes. A monopoly product is unique in the sense that there are no good or close substitutes. From the point of view of buyers, this means that there are no viable alternatives. The buyer is forced to purchase the product from the monopolist or bypass it.

"dictating the price". An individual firm operating under conditions of pure competition does not influence the price of the product, but "agrees with the price". This is due to the insignificance of its share of the total supply. A pure monopolist, on the other hand, "dictates the price" because it controls the total supply of a given product. If necessary, he can change the price of the goods by manipulating the quantity of the offered product.

blocked entry. A pure monopolist has no competitors by definition. The emergence of a monopoly is due to the existence of barriers to entry into the industry. Consider the existing barriers.

scale effect. Modern technology in some industries is such that efficient low-cost production can only be achieved if producers are extremely large, both in absolute terms and relative to market share.

If a pure monopoly exists from the outset, it is easy to see why economies of scale would function as a barrier to competition against that firm. Newly established firms trying to enter this industry as small producers will have very little chance of survival and development. New firms - small producers - will not be able to produce with the same cost savings as the monopolist, and therefore will not be able to achieve the profits necessary for survival and growth.

Another option is to "start already at impressive size", i.e. enter the industry as a large-scale manufacturer. However, it is very difficult for a new enterprise to find cash to acquire the large amount of capital equipment necessary to achieve economies of scale across the entire range of production. The financial barriers to the option mentioned above are in most cases so great that they seem to put a ban on this option. The scale of production explains why the desire to enter industries such as automotive, aluminum and steel is extremely rare.

All of the above circumstances define a natural monopoly, which occurs when the scale of production is so large that a good or service can be produced by only one firm at a lower cost than if it were produced by two or more firms. In addition to pure and natural monopolies, there are also such types of monopolies as administrative, state, economic, closed and open. Initially, it should be noted that there are two types of natural monopolies.

natural monopolies. The birth of such monopolies is due to the barriers to competition erected by nature itself. For example, a firm whose geologists have discovered a deposit of unique minerals and which has bought the rights to a land plot where this deposit is located can become a monopolist. Now no one else will be able to use this deposit: the law protects the rights of the owner, even if he ended up as a monopolist (which does not exclude the regulatory intervention of the state in the activities of such a monopolist).

techno-economic monopolies. This can be conditionally called monopolies, the emergence of which is dictated either by technical or economic reasons associated with the manifestation of economies of scale.

Administrative monopoly

Administrative monopoly arises as a result of actions government agencies. On the one hand, this is the granting to individual firms of the exclusive right to perform a certain type of activity. On the other hand, this organizational structures for state enterprises when they unite and submit to different central administrations, ministries, associations. Here, as a rule, enterprises of the same industry are grouped. They act on the market as one economic entity, and there is no competition between them. Economy of the former Soviet Union belonged to the most monopolized in the world. It was precisely the administrative monopoly that dominated there, primarily the monopoly of all-powerful ministries and departments. Moreover, there was an absolute state monopoly on the organization and management of the economy, which was based on the dominant state ownership of the means of production.

State monopoly

The existence of state monopolies in the market for specific goods and services is caused both by the natural monopoly of individual state enterprises (for example, railway transport), and state restrictions on the influx of new firms into any industry (for example, in the field of export-import operations, strategically important goods etc.).

Unlike a perfect competitor who accepts the market price as given from outside, a monopoly determines its own prices based on the volume of market demand and the magnitude of its costs. Market monopolization leads, as a rule, to a relative reduction in production volumes and higher market prices for goods and services sold by the monopoly. That's why in all developed countries In the world, the state pursues a more or less rigid policy of regulating the activities of monopolies, especially natural ones, and encouraging the forces of competition in the market.

economic monopoly

Economic monopoly is the most common. Its appearance is due to economic reasons, it develops on the basis of the laws of economic development. We are talking about entrepreneurs who have managed to win a monopoly position in the market. There are two paths leading to it. The first is the successful development of the enterprise, the constant increase in its scale through the concentration of capital. The second (faster) is based on the processes of centralization of capital, that is, on the voluntary association or absorption of bankrupt winners. In one way or another, or with the help of both, the enterprise reaches such proportions when it begins to dominate the market.

Our reasoning implies that monopoly's lower unit costs allow it to charge a lower price than if the industry were more competitive. But this may not happen. A pure monopoly can charge much higher prices than unit costs and receive a significant economic profit. In a pure monopoly, the cost advantage can materialize in the form of a profit for the company, rather than more low prices for the consumer. For this reason, the government usually regulates the activities of natural monopolies, stipulating the price they can charge.

open monopoly

An open monopoly variant is a situation in which the expansion of one firm turns it (at least for a certain time) into the sole supplier of a product. The firm achieves monopoly power without having special rights received from the state in the field of protection from competitors.

closed monopoly

A closed monopoly occurs when a firm has special rights received from the state. It is protected by legal restrictions and prohibitions put forward by the state in relation to competitors.

Patent - the right to control the market for a product for a period of time, which is aimed at protecting the inventor from illegal seizure of the product or technical process by competing enterprises that did not share in the time, effort and money spent on its development. In addition, patents can provide the inventor with a monopoly position for the duration of their validity.

The development of patentable products is based on scientific research. Firms that achieve monopoly power through their own research activities or through the purchase of other firms' patents are in an advantageous position, strengthening their market position. Profits from one important patent can be used to fund the research and development required to develop new patentable products. The monopoly power achieved through patents may well increase.

Resource Ownership

The institution of private property can be used as a means of creating an effective barrier to potential competitors. A firm that controls the raw materials that are needed in the production process can prevent the creation of competing firms.

Unfair competition

The firm's rivals can be eliminated and the entry of new competitors blocked by aggressive, violent action. Common tactics include vilifying the product, pressuring resource providers and banks to withhold materials and credit, poaching key personnel, and slashing prices designed to bankrupt competitors.

Now let's turn our attention to the main source of monopoly power - the elasticity of demand for the firm. There are three main factors that determine the elasticity of demand for a firm. First, the elasticity of market demand. The firm's own demand will be at least as elastic as market demand, and therefore the elasticity of market demand limits the potential for monopoly power. Second, the number of firms in the market. If there are many firms on it, and they do not differ much from each other in size, then it is unlikely that one of the firms will be able to significantly affect the price. Thirdly, interaction between firms. Even if there are only two or three firms in the market, none of them will be able to increase the price many times over, if the rivalry between them is not aggressive, with each firm trying to capture the lion's share of the market.

So, we come to the concept of monopoly power. Monopoly (market) power is the ability of a market entity to control market equilibrium parameters in its own interests. Its essence lies in the possession by the subject (group) of ownership of the factors of production and exclusive rights that ensure a dominant position in a certain area (areas) of activity, control over the market and dictate their conditions, regulate prices and production volumes, appropriation of monopoly profits and limit competition.

2.Characteristics of indicators for measuring the monopoly power of a firm

Concentration measures are based on comparing the size of a firm with the size of the market in which it operates. The larger the size of the firm compared to the scale of the entire market, the greater the concentration of the market.

The concentration index is the sum of the market shares of the largest firms operating in the market:

where Yi is the market share of the i-th firm; k is the number of firms for which this indicator is calculated.

qi is the firm's sales volume, Q is the market sales volume

The concentration index measures the sum of the shares of the k largest firms in an industry (with k< n, n -- число фирм в отрасли). Рыночная доля измеряется в относительных долях (0 < Y < 1). При k = n очевидно Yi = 1. Для одного и того же числа крупнейших фирм чем больше степень концентрации, тем менее конкурентной является отрасль.

The concentration index does not say what the size of firms that are not included in the k sample, nor about relative value firms from the sample. It characterizes only the sum of shares of firms, but the gap between firms can be different.

The insufficiency of the concentration index to characterize the potential market power of firms is explained by the fact that it does not reflect the distribution of shares both within the group of largest firms and outside it - between outsider firms. Additional information about the distribution of the market between firms is provided by other measures of concentration.

To measure the degree of inequality in the size of firms operating in the market, the indicator of dispersion of market shares is used:

where Yi is the firm's market share

The average market share of the firm is equal;

n is the number of firms in the market

Also used are indicators of the dispersion of the logarithms of market shares

Both of these indicators have the same economic sense- determination of uneven distribution of shares between market participants. The greater the uneven distribution of shares, the more concentrated the market, other things being equal.

However, dispersion does not characterize the relative size of firms: for a market with two firms of the same size and for a market with 100 firms of the same size, the dispersion in both cases will be the same and equal to zero, but the level of concentration will be different. Therefore, the dispersion indicator is used as an auxiliary tool.

The Herfindal-Hirshman index is defined as the sum of the squared shares of all firms. active on the market:

The index takes values from 0 (in the ideal case of perfect competition, when there are infinitely many sellers on the market, there is only one firm producing 100% of the output). If we consider market shares as a percentage, the index will take values from 0 to 10,000. Than more value index, the higher the concentration of sellers in the market.

Since 1982, the Herfindahl-Hirschman index has been the main benchmark in the implementation of US antitrust policy. Its main advantage is the ability to react sensitively to the redistribution of shares between firms operating in the market. If the shares of all firms are the same, then HHI = 1/n.

The Herfindahl-Hirschman Index provides information about the relative ability of firms to influence the market under different market structures. The market power of a dominant firm in a competitive environment that controls 50% of the market is comparable to the market power of each of the four oligopolistic sellers. Similarly, on average, each of the duopolists that control the market will have approximately the same power to influence the market price as the dominant firm that controls 70% of the market.

The value of the Herfindahl-Hirschman index is directly related to the distribution of market shares of firms, so that:

A measure of the dispersion of a firm's market share.

The above formula allows us to distinguish between the impact on the Herfindahl-Hirschman index of the number of firms in the market and the distribution of the market between them. If all firms in a market control the same share, the distribution ratio zero and the value of the Herfindahl-Hirschman index is inversely proportional to the number of firms in the market. With the same number of firms in the market, the more their shares differ, the higher the value of the index.

The Herfindahl-Hirschman index, due to its sensitivity to changes in the firm's market share, acquires the ability to indirectly indicate the amount of economic profit received as a result of exercising monopoly power.

Gini index

It is a statistic based on the Lorenz curve.

Fig.1 Lorenz curve

The Lorenz curve, which reflects the uneven distribution of any attribute, for the case of concentration of sellers in the market, shows the relationship between the percentage of firms in the market and the market share, calculated on an accrual basis, from the smallest to the largest firms.

In the example of industry market A used by us above, the Lorenz curve will have the form, as shown in Fig.

The Gini index is the ratio of the area bounded by the actual Lorenz curve and the Lorentz curve for an absolutely uniform distribution of market shares (the so-called “absolute equality curve”) to the area of the triangle bounded by the Lorentz curve for an absolutely uniform distribution of shares and the abscissa and ordinate axes.

The Gini index represents a statistic of the form:

Yi - volume production i-th firms

Yj - volume production j-th firms

n is the total number of firms

The higher the Gini index, the higher the uneven distribution of market shares between sellers, and therefore, other things being equal, the higher the concentration in the market,

When using the Gini index to characterize the concentration of sellers, two things should be taken into account: important moments. The first is related to the conceptual flaw of the index. It characterizes, like the indicator of dispersion of logarithms of shares, the level of uneven distribution of market shares. Therefore, for a hypothetical competitive market, where 10,000 firms divide the market into 10,000 equal shares, and for a duopoly market, where two firms divide the market in half, the Gini index will be the same. The second point is related to the complexity of calculating the Gini index: to determine it, it is necessary to know the shares of all firms in the industry, including the smallest ones.

Most indicators of monopoly power explicitly or implicitly measure either the amount of economic profit or the difference between price and marginal cost. To assess the behavior of the company in the market and the type market structure use the following indicators:

* the rate of economic profit (Bain's ratio),

*Lerner coefficient,

*Tobin coefficient (qTobin),

*papandreou coefficient

Coefficient (index) of Bain

Bain's ratio shows the economic return per dollar of equity capital invested.

Accounting profit

Normal profit

In the conditions of competition in the commodity market and efficient financial market the rate of economic profit must be the same (zero) for various kinds assets. If the rate of return in any market (for any asset) exceeds the competitive rate, then this type of investment is preferred, or the market is not freely competitive: there are reasons why the additional return on investment does not equalize in the long run, and this implies that such firms have a certain market power.

Lerner index

The Lerner index (coefficient) as an indicator of the degree of market competitiveness makes it possible to avoid the difficulties associated with calculating the rate of return. We know that, under the condition of profit maximization, price and marginal cost are related to each other through price elasticity of demand. The monopolist charges a price that is inversely proportional to the elasticity of demand in excess of marginal cost. If demand is extremely elastic, then the price will be close to marginal cost, and hence the monopolized market will look like a perfectly competitive market. Based on this, the provisions of A. Lerner proposed in 1934 an index that defines monopoly power:

The Lerner index ranges from zero (in a perfectly competitive market) to one (for a pure monopoly with zero marginal cost). The higher the index value, the higher the monopoly power and the further the market is from the ideal state of perfect competition.

The complexity of calculating the Lerner index is due to the fact that information on marginal cost is quite difficult to obtain. Empirical studies often use this formula to determine marginal cost based on average variable cost data.

Tobin's coefficient (Tobin's q)

The Tobin ratio relates the market value of a firm (as measured by the market price of its shares) to the replacement value of its assets:

P- market price firm's assets (usually determined by the stock price)

C is the replacement cost of the firm's assets, equal to the sum of the costs required to acquire the firm's assets at current prices.

If the valuation of the firm's assets by the stock market exceeds their replacement value (the value of the Tobin coefficient is greater than 1), this can be regarded as evidence of a positive economic profit received or expected. The use of the Tobin index as information about a firm's position is based on the efficient financial market hypothesis. The advantage of using this indicator is that it avoids the problem of estimating the rate of return and marginal cost for the industry.

Numerous studies have found that the coefficient q is, on average, quite stable over time, and firms with a high value of it usually have unique factors of production or produce unique goods, that is, these firms are characterized by the presence of monopoly rent. Firms with small values of q operate in competitive or regulated industries.

Coefficient (index) Papandreou

The Papandreou monopoly power coefficient is based on the concept of cross-elasticity of the residual demand for a firm's product. Necessary condition exercising monopoly power is the low impact on the firm's sales of sellers' prices in related markets or segments of the same market.

However, the indicator of cross elasticity of residual demand by itself cannot serve as an indicator of monopoly power, since its value depends on two factors that have an opposite effect on monopoly power: the number of firms in the market and the level of substitution of the goods of the seller in question and the goods of other firms. An increase in the number of firms in the market leads to a decrease in their interdependence and a corresponding decrease in the cross elasticity of residual demand.

In a perfectly competitive market, the elasticity of residual demand for a firm's product tends to zero. The decrease in the substitutability of the firm's product and the goods of other sellers as a result of deepening product differentiation leads to a decrease in the elasticity of residual demand. But in the same way, the departure of large sellers from the market where the company we are considering operates. will lead to a decrease in its dependence on the pricing decisions of other firms, to a decrease in the elasticity of residual demand. According to the definition of a pure monopoly, the firm should not have close substitutes, therefore, for a monopoly, the elasticity of residual demand (coinciding with market demand) will also tend to zero.

In addition, the influence pricing policy other firms in the market on the volume of sales of the firm in question depends on the limited capacity of other firms, on how much they can actually increase their own sales and thereby reduce the market share of our firm.

To overcome this problem, Papandreou in 1949 proposed the so-called penetration coefficient, which shows how many percent a firm's sales will change if a competitor's price changes by one percent. The formula for the penetration rate (an indicator of Papandreou's monopoly power) looks like this:

Qdi - the volume of demand for the goods of the firm with monopoly power

Pj - competitor's price

Competitors' capacity constraint ratio, measured as the ratio of a potential increase in output to an increase in demand for their product due to a price decrease. It changes from zero to one.

The Papandreou index is practically not used in applied research, but it very curiously reflects two facets of monopoly power: the presence of substitute products in the market and the limited power of competitors (or the possibility of their penetration into the industry). Expression

reflects cross elasticity demand for the firm's product. Its value indicates the possibility of switching consumer demand to competitors' goods. The factor characterizes, in turn, the ability of competitors to take advantage of the increase in demand for their products. The lower any of the factors, the higher the firm's monopoly power.

Thus, we see that the structure of the market is a more complex concept than it seems at first glance. The structure of the market has many facets, which is reflected in its various indicators. We reviewed the indicators of the concentration of sellers in the market and discussed their main properties. The value of the concentration of sellers in the market is extremely important for determining the market structure. However, the concentration of sellers in itself does not determine the level of monopoly power - the ability to influence the price. Only with sufficiently high barriers to entry into the industry can the concentration of sellers be realized in monopoly power - the ability to set a price that provides a sufficiently high economic profit. We have characterized the main types of barriers to entry into the industry, mainly non-strategic barriers that do not depend on the conscious actions of firms.

We have considered the main indicators that characterize the level of monopoly power in the markets and the problems associated with their measurement.

Conclusion

market power in general view is the ability of sellers or buyers to influence the price of goods. Market power exists in two forms. When sellers charge a price above marginal cost, we say they have monopoly power, and we define monopoly power by the amount by which the price exceeds marginal cost. When buyers can get a price that is below their marginal valuation of the good, we say that they have monopsony power, and its amount is determined by the amount by which the marginal valuation exceeds the price.

Monopoly power is partly determined by the number of firms competing in the market. If it has only one firm (pure monopoly), monopoly power depends entirely on the elasticity of market demand. The lower the elasticity of demand, the more monopoly power the firm has. When multiple firms operate in a market, monopoly power also depends on how the firms interact. The more aggressively they compete, the less monopoly power each of them has.

Market power can impose costs on society. The power of a monopoly can cause production to be below competitive levels and therefore consumer surplus and producer surplus can have total net losses.

Sometimes economies of scale make a pure monopoly desirable. But in order to maximize social welfare, the government needs to set and regulate prices.

It should be noted that the concept of "monopoly" is used not only in the strict sense - as a pure monopoly, but is often used in a broad interpretation. In the latter case, monopoly is interpreted somewhat vaguely, as the dominant position of an economic entity in the market, that is, it can be assumed that in this version the concept of "monopoly" includes both pure monopoly and oligopoly.

The problem of limiting or even eliminating competition is a concern in many countries. The main role in its solution is given to the state, the market itself, as shown by the past and modern experience insufficiently capable in protecting competition.

a decisive role in creating a favorable market competitive environment play the antimonopoly legislation and the activities of the antimonopoly authorities, the correct behavior of which contributes to the stabilization of the entire economy as a whole.

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