Market Segmentation Index - Definition

Definition

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

Pp/Ps = C, p ≠ s (1)

Pp and Ps are respectively the prices the producing country set in the primary market (primary market or market of interest) Mp and the secondary market (benchmark) Ms, C is the market segmentation index (MSI), which measures the degree of segmentation of the producing country in the two markets. The MSI was extrapolated from the Lerner Index of market power in the form L=(P-MC)/P in the case of multiple market segments.

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