Analysing competitive markets through consumer choice : a model for competitive market analysis and related market study
Competition policy prescriptions have historically been based on beliefs about the most effective and socially acceptable forms of economic organisation. Despite many theoretical developments, there is little agreement between economists over which theoy ensures effective competition in the public interest. This thesis presents a new perspective for analysing competitive markets by making the consumers' interests the prime focus for policy decisions rather than the firms' behaviour. In this approach, consumers determine the level of 'acceptable' competition and identify areas in which competition could be improved, as opposed to policy makers who theoretically determin how to promote 'effective' competition within markets. This view is developed into a new model for Competitive Market Environment Analysis, the validity of which is verified by a quantitative study of the UK Academic and Professional book market. An innovative and quantitative approach to the 'Public Interest Criterion' of competition policy is developed through a statistical gap analysis technique which measures the extent to which consumers' desires/needs are met by their competitive market environment. Within the model, the gap analysis technique uses a 'degree of congruence' as the unifying factor between supply and demand, for which a quantitative measure of zero indicates perfect market equilibrium. Both the model and gap analysis measurement technique are tested on the UK Academic and Professional book market and a particular type of market conduct namely, the Net Book agreement. The analysis shows that consumers of Academic and Professional books have experienced little benefit or detriment from the abrogation of the agreement. Areas for improvement of Academic and Professional book supply are identified and further extensions of this research are proposed. In summary, the thesis offers a new perspective on competition, a new approach to market analysis a new model and methodology for conducting market analysis and a new quantitative measurement technique. The research has significant implications for policy decision, because the focus on consumer welfare within markets, combined with the gap analysis measurement technique, can be used to measure whether forms of market conduct should be viewed as anti-competitive.