Market Power
Market power is the ability of a company or group to influence the market price of a good or service. It is the ability to set prices or determine the terms of exchange in a market. Market power is an important concept in economics and competition law. It is the ability of a firm to raise prices above the competitive level without losing all its customers. It is also the ability to restrict output and reduce quality without losing all its customers.
History of Market Power
The concept of market power has been around since the early days of economics. Adam Smith, the father of modern economics, wrote about the concept of market power in his book The Wealth of Nations. He argued that market power was a natural consequence of the division of labor and the specialization of production. He also argued that market power could be used to create monopolies and that these monopolies could be used to exploit consumers.
In the 20th century, economists such as Joseph Schumpeter and John Kenneth Galbraith developed the concept of market power further. They argued that market power could be used to create oligopolies and that these oligopolies could be used to manipulate prices and restrict output. This led to the development of competition law, which seeks to limit the power of firms to manipulate prices and restrict output.
Table of Comparisons
| Market Power | Monopoly | Oligopoly |
|---|---|---|
| Ability to set prices | Yes | Yes |
| Ability to restrict output | Yes | Yes |
| Ability to reduce quality | Yes | Yes |
Summary
Market power is the ability of a company or group to influence the market price of a good or service. It is the ability to set prices or determine the terms of exchange in a market. Market power is an important concept in economics and competition law. It is the ability of a firm to raise prices above the competitive level without losing all its customers. It is also the ability to restrict output and reduce quality without losing all its customers. For more information about market power, you can visit websites such as Investopedia, The Balance, and the Federal Trade Commission.
See Also
- Monopoly
- Oligopoly
- Price Discrimination
- Price Fixing
- Competition Law
- Antitrust Law
- Market Structure
- Market Efficiency
- Market Failure
- Price Elasticity
