Analysis On Market Power

This dissertation, taking China's auto manufacturing industry for example, has some theoretical and practical significance on analyzing market power, which will help improve the theoretical system and meet the needs of the China's market economy development, also that of the enhancement of industrial management and upgrading of industrial competitiveness. Since the late 19th century, lots of M&A have led to formation of a growing number of industries characterized by near-monopoly, and correspondingly the core issue of market power ---- monopoly has got more comprehensive discussion and concern. However, through the previous studies, market power is still lack of systematic, in-depth and specialized research. Most studies focusing on the measurement of market power and anti-monopoly policies making mainly link with anti-monopoly, while scarcely have linked it with workable competition and industrial international competitiveness. Few studies have emphasized market power on distinction of various stages from weak to strong and different dimensions, such as the differentiation between market power and monopoly power, market competition, competitiveness and international competitiveness, and that between long-term market power and short-term ones, also between domestic regional market power and international ones. This dissertation will focus on these aspects and do some theoretical researches on market power which will help to further development and perfection of the theoretical system and promote the improvement of the national antitrust. The revitalization of China's auto manufacturing industry has been placed in the strategic position of national economic growth after U.S. financial crisis took place, which fully shows the auto manufacturing industry has been a pillar of the national economic development. The dissertation will discuss the degree, influencing factors and impact on welfare of the market power China's auto industry has. The aim is to assess the effects the important auto industry policies has on the cultivation and regulation of various enterprises'market power, and then to assess whether the policies have achieved the expected purposes and finally underlie the adjustment and optimization of the auto industry policies.In this dissertation, the meaning, classification, measurement, determination, influencing factors and impact on the welfare of the market power will be firstly theoretically discussed. Then the empirical research on China's auto manufacturing industry is to be carried out. Finally, the correlative policies based on international competition and domestic workable competition perspective to cultivate and regulate different market power will be put forward.Accordingly, this dissertation mainly focuses on the following aspects. First are the meaning, classification, measurement and determination of market power. Second is the influencing factors followed. Third is the impact. Fourth is an empirical research. Finally, the correlative policies based on international competition and domestic workable competition perspective to cultivate and regulate different market power will be come up with. The dissertation is specifically divided into seven chapters.Chapter 1 is the introduction. The main topic explains the background and significance, and describes the content and framework, and also presents the difficulties and the research methods as well as the innovations and shortcomings. This dissertation has a systemic and in-depth content and shows a dynamic research perspective, as well uses scientific and reasonable methods. The future research will focus on the market power which the buyers have, that of the industry chain has, and that of China's multi-industry has.Chapter 2 is the literature review. It describes the search of the relevant literature in the writing process, and thereby clarifies the key clues of the relevant research which help to sort out and evaluate the domestic and foreign researches in detail. Found in the study, in theory the current domestic studies emphasize the antitrust and scarcely link market power with extentions such as competitiveness and innovation. The research perspective is restricted to a closed economy and lack of construction of market power in the international competition. The research methods most use the direct measurement but not comprehensive measurement and determination with multi-index. In the empirical research, the domestic studies focus on monopolists and neglect the competitive market, especially, few researches on the auto manufacturing sectors. Those mentioned above will be expanded and improved.Chapter 3 analyzes the definition, content, classification, measurement methods and determination criteria of market power. It extends the meanings of market power and defines as enterprises'comprehensive control power under specific conditions. Also, it differentiates market power from monopoly power, market competition, competitiveness and international competitiveness. Market power can be divided into long-term or short-term ones in a longitudinal dimension and domestic regional or international ones in a transverse dimension. Finally, the corresponding measurement methods with multi-index are prsented. The standards of the market structure, market conduct and market performance are mixed to make a comprehensive determination on market power.Chapter 4 discusses the influencing factors in the formation and change of market power. It analyzes the external factors such as economic developing stages, industry life cycle, institution, resource endowment, demand conditions and degree of opening. Also the intrinsic factors will be probed, such as market structure, market conduct and efficiency. It is found in the study that these factors will have different impacts on market power. The external factors have different degree of impacts and effect direction. At different stages of economic development and industry life cycle, the value of market power changes between 0 and 1, and it reaches the highest point in the late industrialization and when the industry is mature. Local protectionism and market segmentation, administrative monopoly and industrial supporting policies will help to foster the formation and change of market power, whereas policies on anti-monopoly and repression of unfair competition are inhibiting the enhancement. Abundant of homogenous resources, heterogeneous ones that cannot be easily imitated and exclusive rights are conducive to raising market power. Demands with high flexibility limit the increase of market power, where the demands with low flexibility are conducive. The degree of opening can inhibit the enhancement of market power but help to improve the industrial competitiveness. The intrinsic factors mainly have a positive impact on market power. The enterprise's institutional innovation, M&A, advertising investment, technological innovation, vertical restraints, high market concentration, high entry barriers, product differentiation and high efficiency can help market power to form and change.Chapter 5 analyzes impacts on the social welfare market power have. It not only discusses the impacts market power have on the market performance such as industrial resource allocation efficiency, economies of scale and technological progress, but also analyzes the impacts on the consumers, the producers, income distribution and welfare. As is discovered, market power will bring more or less inefficient resource allocation efficiency in the non-perfect competitive markets with the maximal loss in a monopoly, and promote the enterprises to do some M&A to realize economies of scale. The healthy market power can really promote technological innovation and achieve technological progress, but cause some loss of social welfare and result in redistribution of income and social injustice by lessening consumer surplus and increasing producer surplus.Chapter 6 analyzes market power and their impacts on the welfare making China's auto manufacturing industry as an example. It mainly measures and determines the market power China's auto industry has in the longitudinal and transverse dimensions, and then analyzes the corresponding influencing factors and impacts on the social welfare. Discovered by the research, China's auto manufacturing industry has weak long-run and international market power, and the joint ventures in this sector have strong long-run, short-run and domestic regional market power, while China's own brands are lack of international competitiveness with weak market power at home and abroad. During 1991-2008, when China's auto manufacturing industry experienced its market power's formation and change, the influencing factors such as industry life cycle, resource endowments, industrial policies, degree of opening up, barriers to entry, M&A and technological innovation had more significant impacts, but others such as the stage of economic development, demand condition, market concentration, economies of scale and efficiency didn't have significant impacts. This was mainly due to China's auto joint ventures and foreign enterprises have prominent market power, while our own brands have weak market power at home and abroad with deficient independent innovation and indistinctive economies of scale which shows a "double low" phenomenon inconsistent with the theoretical conclusions.Chapter 7 mainly discusses the industries policies that cultivate and regulate different market power from a view of the international competition and domestic workable competition. To the international competition, the cultivation of market power the national enterprises have should set a policy objective to rationalize the market structure and improve their international competitiveness, and guide the market conducts to promote their own competitiveness, and also encourage them to rationalize their organizations which help to enhance their specialization and scale. To the domestic workable competition, the regulation on market power should restrict the dominating behaviors of the joint ventures and foreign enterprises caused by their long-run market power, especially the foreign enterprises'M&A behaviors, besides the administrative protection behaviors from the local governments should be completely withdrew, a scientific dynamic monitoring system on antitrust should be established.