Abstract

RAMIREZ, Natanael; MUNGARAY, Alejandro; AGUILAR, José G.  and  INZUNZA, Ramón. Understanding the Mecanisms Behind the Profitability and Market Power of Marginalized Microenterprises. Econ: teor. práct [online]. 2017, n.46, pp.97-113. ISSN 2448-7481.  https://doi.org/10.24275/etypuam/ne/462017/ramirez.

The paper analyzes the behavior of microenterprises in a context of imperfect competition in which they have the ability to profitably raise the market price of goods over their marginal cost. This allows them to survive and even be profitable despite the conditions under which they typically operate. We use an econometric model to conduct the analysis, in which we explain the Lerner index as a function of several qualitative variables previously classified by area of influence. We conclude that microenterprises are capable of being profitable and operating with market power through advertising and sales strategies due to the flexibility of the production process. In any case, the capacity to set prices is strongly influenced by the socioeconomic conditions of the market in which they operate.

Keywords : Microenterprises; market power; marginalization; Lerner’s Index.