# Market Segmentation Index

﻿
Market Segmentation Index

Market Segmentation Index or Celli Index of Market Segmentation, named after the Italian economist Celli G. GianLuca, is a measure of market segmentation. This Index, is a comparative measure of the degree of monopoly power in two distinctive markets for products that have the same marginal costs. The degree of market segmentation is defined as the degree of monopoly power of the producing firm or exporting country. Higher is the average unit value (AUV) of the same product sold in the primary market compared to the benchmark market, greater is the degree of monopoly power in that market and therefore higher is the degree of market segmentation.

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.

## Proposition 1

If C > 1 then a monopolist country has a higher degree of monopoly power in segment Mp than segment Ms and therefore this country has a greater incentive to specialize in Mp.

## Proposition 2

If C < 1 then a monopolist country has a lower degree of monopoly power in segment Mp than segment Ms and therefore this country has a greater incentive to specialize in Ms.

## Proposition 3

If C ≈ 1 then a monopolist country experience no difference in the degree of monopoly power between segment Mp and segment Ms and therefore this country has no monopolistic incentive to specialize in either markets.

From Learner Index to Market Segmentation Index (MSI)

Assumption 1: Marginal costs for the monopolist firm are the same for every market segment

Applying Lerner index L=(P-MC)/P to two distinctive market segments we get the degree of monopoly power in market segment Ms as Ls=(Ps-MC)/Ps and Mp as Lp=(Pp-MC)/Pp. Ps is the price charged in Ms while Pp is the price charged in Mp.

This result confirms the validity of the Market Segmentation Index, which is a comparative measure of the degree of monopoly power in two distinctive markets for products that have the same marginal costs. The result says that when the price in the primary market is strictly greater than the price in the secondary market then the Lerner's Index is higher in the primary market and therefore the Market Segmentation Index would also be higher for the primary market.

## References

• Anderson E.T. and James D.(2006) Integrating Models of Price Discrimination. Kellog School of Management. Northwestern University.
• Armstrong G. and Kotler P. (2001). Principles of Marketing. ISEDI, Torino.
• Nault, Barrie R. and Wei, Xueqi (David), "Product Differentiation and Market Segmentation of Information Goods" (December 2, 2005). Available at SSRN: [1]
• Spiegel Y. (1997) Second Degree Price Discrimination. Bergals School of Economics. Tel Aviv University.
• Ohmae, K. (1982), The Mind of the Strategist, McGraw-Hill, New York, NY.

Wikimedia Foundation. 2010.

### Look at other dictionaries:

• Market segment — A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. A true market segment meets all of the following criteria: it is distinct from other segments… …   Wikipedia

• International trade — is exchange of capital, goods, and services across international borders or territories. [ [http://dictionary.reference.com/browse/trade dictionary.reference.com] ] In most countries, it represents a significant share of gross domestic product… …   Wikipedia

• Marketing — For the magazine, see Marketing (magazine). Marketing Key concepts Product …   Wikipedia

• Cluster analysis — The result of a cluster analysis shown as the coloring of the squares into three clusters. Cluster analysis or clustering is the task of assigning a set of objects into groups (called clusters) so that the objects in the same cluster are more… …   Wikipedia

• Taylor Nelson Sofres — Infobox Company company name = Taylor Nelson Sofres plc company company type = Public (LSE|TNS) foundation = 1997 location = London, United Kingdom key people = Donald Brydon (Chairman of the board), David Lowden (CEO) industry = Marketing… …   Wikipedia

• Lars Osberg — Biography Lars Osberg (PhD. Yale) has been a part of the Economics Department at Dalhousie University (Halifax, NS, Canada) since 1977. He is well known internationally for his contributions in the field of economics. His major research interests …   Wikipedia

• Yield curve — This article is about yield curves as used in finance. For the term s use in physics, see Yield curve (physics). Not to be confused with Yield curve spread – see Z spread. The US dollar yield curve as of February 9, 2005. The curve has a typical… …   Wikipedia

• GfK — Infobox Company company name = GfK Group company logo = company type = Public foundation = 1934 location = Nuremberg key people = Professor Dr. Klaus L. Wübbenhorst (Chief Executive Officer) industry = Marketing research products = Research… …   Wikipedia

• Grid computing — is a term referring to the combination of computer resources from multiple administrative domains to reach a common goal. The grid can be thought of as a distributed system with non interactive workloads that involve a large number of files. What …   Wikipedia

• Humanitarian Use Licenses — are provisions in a license whereby inventors and technology suppliers protect in advance the possibility of sharing their technology with people in need. Thus, Humanitarian Use Licenses set the conditions for the provision of access to… …   Wikipedia