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top   »  business   »  business models   »  markets   »  market power

What is Market Power?

 , November 17, 2015
Market power is the ability for a firm to raise the market price for something. In a highly competitive market, individual participants have little or no control over price. For example, a farmer producing a commodity crop can't affect the price much. Market power extends from a competitive advantage or dominant market position.
In some cases, a firm can raise their prices without losing any customers. This is referred to as total market power and is most typical amongst monopolies. In such scenarios, firms have incentive to raise prices extremely high.
Overview: Market Power
AreaEconomics
DefinitionA firm's ability to raise market prices.
ExampleA telecom company with a monopoly in a particular region can raise prices extremely high in the absence of price regulations.
A medicine protected by pharmaceutical patents may have near total market power.
Related ConceptsMonopsony
Natural Monopoly

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