A Research On The Market Power Based On Both Buyers And Sellers

Market power means that companies have a price mark-up capacity higher than the marginal cost. The greater market power enterprises have, the greater price mark-up they have. With China's rapid development of the iron and steel industry, the demand for iron ore continued to expand, increasing the output of domestic iron ore demand. At present, several countries have dominated the international market pricing. How to make use of iron ore in the international market pricing is of great significance to China.On the basis of the Song-Marchant-Reed RDE model of market power, the paper endowed it more realistic explanation through further expansion and amendment. After that, this paper, using the revised model of the international iron ore market, measured the market power of the China and Australia respectively as a buyer and seller, and analyzed the reasons for lack of market power for China's iron ore in the international market, then put forward policy recommendations on this basis.This paper's main points are as follows: Based on the perspective of buyers and sellers and on the Song-Marchant-Reed model, this paper made a further expansion for the measurement models of the market power to make them more realistic and explanatory; used the expanded model to analyze the iron ore trade between China and Australia empirically, having concluded market power in Australia is 50.44 %, while in China it's a 27.71% market power; and through model analysis, the residual supply elasticity, residual demand elasticity, alternativity, related products' prices and sea transport prices are the main factors to influence the market prices, of which the residual supply elasticity and residual demand elasticity are the key elements to impact the market power.