3 Market Power

Subject(s):

Buyer power — Barriers to entry — Collective or joint dominance — Super-dominance — Monopoly — Market power

The chapter deals with market power, a core economic concept for competition law. Market power is not usually prohibited as such, since in competitive markets the prospect of achieving market power drives competitive effort and attracts entrants. Rather, competition law tries to prevent the abuse of market power. Market power is a matter of degree. This chapter discusses the assessment of market power with reference to market shares, concentration measures, and entry and exit barriers (such as economies of scale, sunk costs, and network effects). It explores the role of profitability as an indicator of market power, and discusses buyer power and bidding markets. The chapter also deals with the insights from behavioural economics into the interaction between consumers and suppliers, and resulting market power. Finally, the chapter considers market power in dynamic, innovative markets.