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In economics, market power is the ability of a firm to alter the market price of a good or service. A firm with market power can raise price without losing all customers to competitors. Economics (from the Greek οίκος [oikos], family, household, estate, and νομος [nomos], custom, law, hence household management and management of the state) is a social science that studies the production, distribution, trade and consumption of goods and services. ...
When a firm has market power it faces a downward-sloping demand curve. In economics, the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price. ...
In perfectly competitive markets, market participants have no market power. A firm with market power has the ability to individually affect either the total quantity or the prevailing price in the market. If the demand curve is downward sloping (that is, the most common situation where price increases lead to a lower quantity demanded), then the decrease in supply as a result of the exercise of market power creates an economic deadweight loss in comparison with a situation of perfect competition. This is often viewed as socially undesirable, and as a result, many countries have anti-trust or other legislation with the aim of limiting the ability of firms to accrue market power. Such legislation often regulates mergers and sometimes introduces a judicial power to compel divestiture. Perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. ...
Firm can have several meanings: Firm - a loose legal term for a company. ...
In economics, the demand curve can be defined as the graph depicting the relationship between the price of a certain commodity, and the amount of it that consumers are willing and able to purchase at that given price. ...
In economics, a deadweight loss (also known as excess burden) is a permanent loss of well being to society that can occur when equilibrium for a good or service is not Pareto optimal, (that at least one individual could be made better off without others being made worse off). ...
Perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. ...
Media:Example. ...
The phrase mergers and acquisitions or M&A refers to the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies as well as assets. ...
Divestment (divestiture) is a term in finance and economics. ...
A firm usually has market power by virtue of it controlling a large portion of the market. In extreme cases - monopoly and monopsony - the firm controls the entire market. However, market size alone is not a good indicator of market power. Highly concentrated markets may be contestable if there are no barriers to entry or exit, limiting the incumbent firm's ability to raise its price above competitive levels. Contestable markets refer to a market situation where there are very few, perhaps even only one, firm yet perfectly competitive market outcomes may still be observed (as opposed to expected monopolistic or oligopolostic outcomes). ...
In economics and especially in the theory of competition, barriers to entry are obstacles in the path of a firm which wants to enter a given market. ...
Market power gives firms the ability to engage in unilateral anti-competitive behavior. Such behaviour may include predatory pricing, product tying, and creation of overcapacity or other barriers to entry. If no individual participant in the market has significant market power, then anti-competitive behavior can take place only through collusion, or the exercise of a group of participants' collective market power. Anti-competitive practices are business or government practices that prevent and/or reduce competition in a market. ...
Predatory pricing is the practice of a dominant firm selling a product at a loss in order to drive some or all competitors out of the market, or create a barrier to entry into the market for potential new competitors. ...
Tying is the anti-competitive practice of requiring de facto or de jure the customer to purchase a certain package of goods together. ...
In the study of economics, collusion takes place within an industry when rival companies cooperate for their mutual benefit. ...
Oligoploy When several firms each have significant market power, the resulting market structure is called an oligopoly or oligopsony. The behavior of firms in perfect competition or monopoly can be treated as a simple optimization, but an oligopoly requires game theoretic analysis. An oligopoly is market form in which a market is dominated by a small number of sellers (oligopolists). ...
An oligopsony is a market form in which the number of buyers are small while the number of sellers in theory could be large. ...
In mathematics, the term optimization refers to the study of problems that have the form Given: a function f : A R from some set A to the real numbers Sought: an element x0 in A such that f(x0) ≤ f(x) for all x in A (minimization) or such that...
Game theory is a branch of applied mathematics that studies strategic situations where players choose different actions in an attempt to maximize their returns. ...
Monopoly power Monopoly power is an example of market failure which occurs when one or more of the participants has the ability to influence the price or other outcomes in some general or specialized market. The most commonly discussed form of market power is that of a monopoly, but other forms such as monopsony, and more moderate versions of these two extremes, exist. Market participants that have market power are sometimes referred to as "price makers", while those without are sometimes called "price takers". Market failure is a situation in which markets do not efficiently organize production or allocate goods and services to consumers (for example, a failure to allocate goods in a way some see as socially or morally preferable). ...
In economics and business, the price is the assigned numerical monetary value of a good, service or asset. ...
A physical marketplace in Portugal enables buyers and sellers of produce to do business with each other. ...
In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ...
In economics, a monopsony is a market form with only one buyer, called monopsonist, facing many sellers. ...
A well known example of monopoly market power is Microsoft's market share in PC operating systems. The United States v. Microsoft case concerned the allegation that Microsoft illegally exercised its market power by bundling its web browser with its operating system. Some have suggested that Wal Mart exercises monopsonistic market power; its size allows it to extract extremely low prices from its suppliers. Microsoft Corporation (NASDAQ: MSFT, SEHK: 4338) is an international computer technology corporation with 2005 global annual sales of close to $40 billion USD and about 64,000 employees in 85 countries and regions which develops, manufactures, licenses, and supports a wide range of software products for computing devices. ...
One of the first PCs from IBM - the IBM PC model 5150. ...
An operating system is a special computer program that manages the relationship between application software, the wide variety of hardware that makes up a computer system, and the user of the system. ...
United States v. ...
It has been suggested that Comparison of web browsers be merged into this article or section. ...
Wal-Mart Stores, Inc. ...
See also In economics, bargaining power refers to the ability to influence the setting of prices or wages, usually arising from some sort of monopoly or monopsony position -- or a non-equilibrium situation in the market. ...
In economic theory, imperfect competition, is the competitive situation in any market where the conditions necessary for perfect competition are not satisfied. ...
In economics, a natural monopoly occurs when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier [citation needed]. Natural monopolies arise where the largest supplier in an industry, or the first supplier in a local area...
Predatory pricing is the practice of a dominant firm selling a product at a loss in order to drive some or all competitors out of the market, or create a barrier to entry into the market for potential new competitors. ...
For other pricing strategies and policies see: Pricing Strategies Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. ...
External links
References - Managerial Economics and Organizational Architecture 3rd Edition, Brickley, Smith and Zimmerman, McGraw-Hill, Chapter 7
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