Monopoly power

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Monopoly power we know is a seller's ability to charge a price above the competitive level (roughly speaking, above cost, including the cost of capital) without losing so many sales to existing competitors or new entrants as to make the price increase unprofitable. E.g., United States v. Microsoft Corp., 346 U.S. App. D.C. 330, 253 F.3d 34, 51 (D.C. Cir. 2001) (per curiam). The word "monopoly" in the expression "monopoly power" was never understood literally, to mean a market with only one seller; a seller who has a large market share may be able to charge a price persistently above the competitive level despite the existence of competitors. Although the price increase will reduce the seller's output (because quantity demanded falls as price rises), his competitors, if they are small, may not be able to take up enough of the slack by expanding their own output to bring price back down to the competitive level; their costs of doing so would be too high--that is doubtless why they are small. George J. Stigler, "The Dominant Firm and the Inverted Umbrella," in Stigler, The Organization of Industry 108 (1983); George L. Mullin et al., "The Competitive Effects of Mergers: Stock Market Evidence From the U.S. Steel Dissolution Suit," 26 RAND Journal of Economics 314 (1995).

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Sheridan v. Marathon Petroleum Co., LLC, 530 F.3d 590, 594 (7th Cir. 2008) (Posner, J.).