Examining Competition and Monopoly Power in the Industrial Sector: a Case Study of Bbasic Metals, Motor Vehicles and Chemical Products

Competition and monopoly are key concepts in the industry. Competition in an industry improves quality and decreases prices for consumers, while a monopoly leads to price setting and production reduction, which can diminish quality and innovation. In this article, an attempt was made to examine the situation of monopoly and competition to examine competition and monopoly power in large industries such as basic metals, the motor vehicle manufacturing industry, and the chemical products manufacturing industry. For this purpose, various criteria such as concentration, barriers to entry, economies of scale, Lerner index, markup, and social cost of monopoly were used. For data analysis, raw data from the Statistical Center of Iran with a four-digit ISIC code during the period 2002 to 2018 were used. The results showed that the basic iron and steel production industry, the basic chemical production industry, the primary plastic and synthetic rubber production industry, and the motor vehicle production industry had the highest sales share. These industries have high concentration, high Lerner index and mark-up, high barriers to entry, high social costs, and low economies of scale. Additionally, in these industries, there was a significant and positive relationship between the Lerner index and welfare costs of monopoly. In addition, it was determined that the social costs of monopoly were high in all years of the mentioned period and reduced the efficiency and welfare of society.