Market Power Assignment Help
How important to economic growth is the constraint of market power through antitrust legislation? How much market power is too much for a firm to enjoy? How is market power best measured?
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Constraint of market power through antitrust legislation
In any case related to antitrust, market power plays a major role as it influences the behaviour and activities of the firm and allows others to judge if the firm is acting legally or illegally. To many antitrust laws and cases happening in the present, we can probably confirm that market power standards are being absorbed and compromised by the laws. If the goal is to maximize the application of antitrust law to benefit the public, it is possible to see flexibility in entry to the market, competition between firms, leisure time offered to workers and most importantly, the wealth of creditors associated with the firms.
It is appropriate to consider antitrust legislation as a mere prescription for consumer welfare and when this legislation is compromised, market power reduces.
Too much market power definition
Lately, monopolies enjoy a good percentage of market power due to the freedom in setting prices and deciding the production quantities. However, on the other side, the power can work in the reverse when the product is not of need/demand to the users. Kopf (2018) links capitalism to decide the degree of market power.
When a company charges its customers beyond the manufacturing price that in turn results in huge profits, the situation can be called as too much market power. This leads to emergence of powerful companies where employees do not have flexibility and the economic growth is substandard.
Measurement of market power
A common approach to measure market power is described as Herfindahl-Hirschman Index(Tremolet and Binder, 2009). According to this index, squares of market share percentages belonging to all the stakeholders in the market are summed. When competition is perfect, the index is zero and in the case of monopoly, the index is usually 10,000.
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