Discuss the issue of Market Power. Introduction and definitionMarket power is defined as the ability of a firm to independently raise prices

The first 200 words of this essay...

Discuss the issue of Market Power.

Introduction and definition

Market power is defined as the ability of a firm to independently raise prices above market levels for a non-transitory period without losing sales to such a degree as to make this behaviour unprofitable.

Market share can be measured in several ways, including monetary value, units of sales, units of production and production capacity. Market share alone can be an inaccurate measure of market power. However, it is unlikely that a firm without significant market share will have sufficient market power to behave anti-competitively on its own. Therefore, market share is usually a starting point in determining market power. Barriers to entry are the extent to which established suppliers are constrained by the prospect of new market entry is a key factor in whether the established suppliers have market power. The barriers include the suck costs, capital costs, limit pricing, economies of scales, patents etc. Pricing and profitability are other factors relevant to a determination of market power. Price competition, which consists of "follow the leader" behaviour, is consistent with the exercise of market power by the price leader. The profitability also relates to market power. Excessive profitability