Investigating the Monopoly Structure and Estimating its Social Costs in the Iranian Steel Industry

purpose of this study is to estimate the social cost of monopoly and economies of scale in the Iranian steel industry. In this study the Herfindahl-Hirschman index is used to understand the structure of the steel industry. Harberger and Posner indices are used to calculate the welfare cost. According to the Herfindahl-Hirschman index, Iran's steel industry has always been in a monopoly position from 1991 to 2017, although this monopoly power has been declining, this industry is far from beeing competitive. The results of the Harberger and Posner indices show that the social cost of monopoly has increased during the study period. Estimation of the cost function of the steel industry by seemingly unrelated regression methods showed that there is a possibility of inputs substitution. The most basic solution for the managers of this industry is to increase the production level in order to bring the production level closer to the optimal level.