Definition Market segmentation index

1 definition

1.1 proposition 1
1.2 proposition 2
1.3 proposition 3

definition

the degree of market segmentation defined degree of monopoly power of producing firm or exporting country. higher average unit value (auv) of same product sold in primary market compared benchmark market, greater degree of monopoly power in market , therefore higher degree of market segmentation, expressed in following formula:

pp/ps = c, p ≠ s (1)

pp , ps respectively prices producing country set in primary market (primary market or market of interest) mp , secondary market (benchmark) ms, c market segmentation index (msi), measures degree of segmentation of producing country in 2 markets. msi extrapolated lerner index of market power in form l=(p-mc)/p in case of multiple market segments.

proposition 1

if c > 1 monopolist country has higher degree of monopoly power in segment mp segment ms , therefore country has greater incentive specialize in mp.

proposition 2

if c < 1 monopolist country has lower degree of monopoly power in segment mp segment ms , therefore country has greater incentive specialize in ms.

proposition 3

if c ≈ 1 monopolist country experiences no difference in degree of monopoly power between segment mp , segment ms , therefore country has no monopolistic incentive specialize in either market.