產(chǎn)業(yè)經(jīng)濟(jì)學(xué)英文版課件：8-Measuring Market Power

1、Identifying and MeasuringMarket PowerMarket PerformanceEconomic Profits or Rates of Return on InvestmentLerner Index, or the Price-Cost MarginTobins qEconomic Profits or Rates of Return on InvestmentEconomic profits are the difference between revenues and the opportunity cost of all inputs. In the l

2、ong run, economic profits are an indicator of market power. In competitive markets, economic profits are eliminated by entry.Monopoly profits can only persist in the long run if there are entry barriers that provide the firm with market power. 3Economists versus AccountantsRevenueTotalopportunitycos

3、tsHow an EconomistViews a FirmHow an AccountantViews a FirmRevenueEconomicprofitImplicitcostsExplicitcostsExplicitcostsAccountingprofitExampleA purchased a cab for 10,000 at the beginning of the year, its resale value at the end of the year was 7,000 and suppose that prevailing interest rates are 10

4、% per year. Suppose that the revenues of the car were 20,000, fuel costs were 3,000, insurance 2,000, and the opportunity cost of his time 10,000. Accounting profits? Economic Profits?The realized rate of return?5Example: Accounting ProfitsAccounting profits=Revenues explicit Costs= 20,000 (3,000 +

5、2,000 +3,000)= 12,000Example: Economic ProfitsEconomic Profits = Revenues - Opportunity Costs (explicit costs + implicit costs)The opportunity cost of the car is 4,000; economic depreciation is 3,000, and lost interest income is 1,000. = 20,000 (3,000 + 2,000 + 1,0000 +3,000+1,000)= 1,000Example: Th

6、e realized rate of returnLerner Index, or the Price-Cost MarginTobins qThis measure uses stock market valuations to assess economic profits. Tobins q is the ratio of the market value of the firm to the replacement cost of its assets (Tobin 1969). The market value of the firm is the sum of the value

7、of its outstanding stock and debt. Tobins qThe amount by which the market value of the firm exceeds the replacement cost of its assets is often interpreted as a measureby financial marketsof economic profits.The greater the extent that q exceeds 1, the greater the valuation of the firms returns rela

8、tive to the cost of its assets, and the greater the implied economic profits.Tobins qIf a firm is worth more than its value based on what it would cost to rebuild it, then excess profits are being earned. These profits are above and beyond the level that is necessary to keep the firm in the industry

9、.If Tobins q (the ratio of the market valuation of assets to the replacement cost of assets) is above 1, the firm is earning a rate of return higher than that justified by the cost of its assets. Such a return could not persist in the absence of long-run entry barriers.Tobins qIndustryqPhoto equipme

10、nt3.08Chemicals2.40Food products1.70Tobacco1.39Apparel1.13Primary metals0.85Median1.35SOURCE: Lindenberg, E., and S. Ross (1981). Journal of Business 54:1, 1981 by The University of Chicago. All Rights Reserved.ConcentrationSeller concentration refers to the number and size distribution of firms. Fe

11、wer and larger firms lead to increases in seller concentration. Two measures of seller concentrationConcentration RatiosHerfindahl-Hirschman IndexConcentration RatiosHerfindahl-Hirschman IndexExampleFirmHHI10.20.20.20.20.20.00.80.220.50.10.10.10.10.10.80.3The larger the variance of firm sizesindicating a wider distribution of firm sizes around the meanthe larger HHI. For instance, the two industries would also have a CR4 of 0.80. However, the HHI for the first industry is 0.20, while in the second industry it is 0.30.Conditions of EntryBain (1956) defined the height of entry barrier