Andrew Chin Andrew Chin

Andrew Chin

Course:  Antitrust Law

"The offense of monopolization has two elements: '(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'"  United States v. Microsoft Corp., 253 F.3d 34, 50 (2001) (citing United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)).

How might monopoly power arise from growth or development as a consequence of historic accident?  The French economist Robert Gibrat studied this question and, in his book Inégalités Économiques (1931), proposed a basic model of firm growth and industry structure that continues to influence industrial organization scholarship today.  Gibrat's model is based on the assumption that during each period, the growth rate for each firm in a market is an independent, identically distributed random variable.  (Is this assumption realistic?  See John Sutton, Gibrat's Legacy, 35 J. ECON. LIT. 40 (1997).)

In the simulation below, there are ten firms (named A through J).  During each period, each firm experiences a growth rate of between -20% and +30% (taken at random from a uniform distribution).  The table automatically sorts and ranks the firms by size and calculates the Herfindahl-Hirschman index of concentration for the market.

Try hitting the "advance time" button repeatedly and see if you can discern any patterns in the long-run behavior of this random process.  What are the implications of these patterns for your commitments to personal and property rights?  For your vision of antitrust law?

Previous Rank Current Rank Firm Size Share %
Period = HHI =

by periods

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