Page 61 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

evidence of a decline in output or excessive price increases following

implementation of alleged exclusionary practices. The use of such evidence can
carry significant problems of interpretation and reliability, however [Fisher and

McGowan 1983: 81-97], but it could be relevant in some cases.

Evaluating the existence of a dominant position. Once the relevant
markets have been defined, it is generally a straightforward analysis to deter-

mine whether a firm occupies a dominant position. This depends on two main
factors: the market share of the dominant firm and the extent of entry barriers.

The assessment of market shares. In general, the greater the market
share of an alleged dominant firm, the more likely it is to exercise market

power. It is nearly impossible to set out market share thresholds at which a

firm can be judged to have or not have significant market power. It is
unlikely, however, that a firm with a market share of less than 35 percent

would have the ability to reduce output or impose a significant price increase

above the competitive level. Conversely, where a firm has a market share of
65 percent or more, it is much more likely to exercise market power, if

significant entry barriers exist.
In addition to its own market share, a firm’s ability to exercise

market power may also depend on the size of other firms in the market. For
example, even if a firm has a market share of 50 percent, its ability to

exercise market power maybe limited if the rest of the market consists of a

small number of competing firms that compete vigorously with the leader as
opposed to a cluster of weaker firms that simply adopt prices established by

the leader. Finally, even where a single firm has an overwhelming share of a
market, it may be unable to exercise market power if entry by new firms or

expansion by existing competitors is easy.
Assessment of entry condition. Identifying entry barriers in abuse

cases is not so different from other antitrust cases, for example, merger

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