E0074: Market Structure Power Analysis Framework

Quality / Updated / COI

Quality

Reviewed

Updated

02/14/2026

Source

Citations & Trust

COI

none

TL;DR

Market Structure Power Analysis Framework guides assessing market power for competition policy decisions by structuring HHI concentration, price-cost margin, and entry rate and making the trade-off between efficiency gains versus competition intensity explicit. It keeps assumptions visible for assessing market power for competition policy decisions and produces a reusable decision record.

Applicability

Use this framework when assessing market power for competition policy decisions and teams disagree on market share data, cost structures, and regulatory barriers. It fits decisions that need cross-functional alignment, numeric justification, and a written rationale. Apply it when reversal costs are high or when data sources are fragmented across systems.

Steps

1. Define scope, horizon, and success metrics (HHI concentration, price-cost margin, and entry rate); confirm baseline data quality and key assumptions.
2. Collect inputs (market share data, cost structures, and regulatory barriers) for each option and normalize units, timing, and ownership so comparisons are consistent.
3. Run scenario and sensitivity checks to see how efficiency gains versus competition intensity shifts; note thresholds that change the recommendation.
4. Select a preferred option, record decision criteria, and list constraints or approvals required before execution.
5. Set monitoring cadence, owners, and triggers for revisit; store the decision log and update when evidence changes.

Template

Template: 1) Background and objective 2) Scope and time horizon 3) Success metrics (HHI concentration, price-cost margin, and entry rate) 4) Key assumptions (market share data, cost structures, and regulatory barriers) 5) Options A/B/C 6) Scenario ranges 7) Trade-off summary (efficiency gains versus competition intensity) 8) Risks and mitigations 9) Decision criteria 10) Recommendation 11) Owner and timeline 12) Review triggers. Include data sources, document confidence levels, and flag variables that change outcomes materially.

Pitfalls

• Using inconsistent units or timing across options makes comparisons misleading and erodes trust in the output.
• Ignoring the efficiency gains versus competition intensity in stakeholder discussions invites later reversals when priorities shift.
• Failing to record assumptions and data sources causes rework when results are challenged or audited.

Case

Case: During assessing market power for competition policy decisions, teams debated options without a shared frame. The group applied Market Structure Power Analysis Framework, aligned on HHI concentration, price-cost margin, and entry rate, and built scenarios around market share data, cost structures, and regulatory barriers. Sensitivity checks clarified where the efficiency gains versus competition intensity flipped the ranking. The final decision was documented with owners and review dates, reducing cycle time and avoiding re-litigation in later quarters.

Citations & Trust

• Principles of Microeconomics 3e (OpenStax)