A persistent topic in antitrust cases is the extent of profits that an alleged monopolist is receiving. Principal Dr. Bin Zhou and Senior Associate Dr. Patrick Holder recently coauthored an article for Antitrust Magazine reviewing recent economic analysis performed in academic, legal, and regulatory contexts that highlight some examples of how economists have recently leveraged accounting data in antitrust economics.
In this article, the authors describe how to calculate economic profit and the economic rate of return using firm financial data and set forth some of the key economic issues when considering whether a given level of economic profit may be reflective of the presence and exercise of market power. They also make a number of recommendations for how to properly use accounting data to assess a firm’s market power, in particular when the firm in question has significant intangible assets.
The full article, “The Proper Measure of Profits for Assessing Market Power,” is available below.