Definition For Market Power

Factors such as the nature of demand and barriers to industry entry affect market power.

Definition for market power. A firm with total market power can raise prices without losing any customers to competitors. In a highly competitive market individual participants have little or no control over price. Since market power is related to barriers to entry the absence of entry attempts may be seen as an indication of market power. Market power refers to the ability of a firm or group of firms to raise and maintain price above the level that would prevail under competition is referred to as market or monopoly power.

Thus each firm has to accept the current market price without being able to exercise any control over. Market power extends from a competitive advantage or dominant market position. The exercise of market power leads to reduced output and loss of economic welfare. Market power is a measure of the ability of a company to successfully influence the pricing of its products or services in the overall marketplace.

This lesson aims to present market power in the economic sense. Extent to which a firm can influence the price of an item by exercising control over its demand supply or both. For example a farmer producing a commodity crop can t affect the price much. A company with substantial market.

The ability of a company to control prices in a particular industry. Under the economic concept of perfect competition all firms in a market are assumed to have zero market power. In economics and particularly in industrial organization market power is the ability of a firm to profitably raise the market price of a good or service over marginal cost in perfectly competitive markets market participants have no market power. However entry threats may arise from firms offering quite different services as long as they provide a new home for users attention and needs.

Market power refers to a company s relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply demand or both.