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Market Power, also known as market power, refers to the seller（seller）Or Buyer（buyer）Improperly affectcommodity priceAbility.For the seller, market power is also the seller's monopoly tendency.It means that one person (or a small group of people) improperly influencesmarket priceAbility.For example, supposein townEveryone needs water, but there is only one well.The owner of the well has market power over the sale of water - in this case, it is a monopolist.The owner of this well is not restricted by cruel competition, but under normal circumstancesInvisible handIt is this kind of competition that restricts personal interests.You will know that in this case, the price charged by the monopolist may increaseeconomic efficiency 。[1]
Chinese name
Market power
Foreign name
Market Power
Alias
market power
Nature
The ability of the seller or buyer to influence the price of goods
Market power isMarket Failure It is a relatively common phenomenon.It refers to an economic actor or one of the economic actorsSmall cliqueImproperly affectmarket priceAbility.Market power can make the market unable to allocate resources effectively, leading to market inefficiency, because it will cause price and quantity deviationbalance between supply and demand。
Ifin townEveryone needs water, but there is only one well.Of this wellownerIn this case, he is a monopolist.The owner of this well is not restricted by cruel competition, but under normal circumstancesInvisible handIt is this kind of competition that restricts personal interests.In this case, the price charged by the monopolist may be increasedeconomic efficiency 。
Form of expression
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The manifestations of market power mainly includeIndustrial monopoly、natural monopoly、monopolistic competition, price production alliance, etc.Market power has two manifestations:Seller's monopoly power(monopoly power) andBuyer monopoly power（monopsony power）。From the perspective of enterprises, having market power means that they can obtain more profits;From the perspective of consumers, enterprises with market power mean that they have to take more money out of their wallets;From a social perspective, the existence of market forces means thatsocial resourcesInefficient use.Of course, there are also views (such asAustrian School）It believes that market power is "more than fault".
Producersproduct priceThe influence of is the seller's monopoly power, and the influence of consumers on product prices is the buyer's monopoly power.In the real world, each producer and consumer actually has a certain market power.
classification
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Brandow classifies manufacturers into long-term market power and short-term market power according to the length of their market power;According to the manufacturer's behaviorInitiativeMarket forces are divided into defensive market forces and offensive market forces.[2]It is of great significance to divide the market power according to the length of time.Short term means that within 2-3 years, the manufacturer may have influence on other manufacturers andMarket participantsFor example, a large liquid milk supplier can raise the price of milk in a city in a short time, but with other manufacturersthroughputExpansionPotential entrantsOr large distributors through vertical mergersProduction fieldThis market power will be weakened.However, if the above manufacturers can guide other manufacturers to follow himPrice strategy, then, he becomesPrice leaderIf it is possible to block some potential entrants out of the market through legal barriers, then manufacturers will have long-term market power.The length of time required for the expansion of competitors, the entry of new manufacturers, or the development of other restrictions on the use of market power by manufacturers determines the type of short-term or long-term market power.
It is necessary to distinguish between short-term and long-term market power because market power is actually a measure of monopoly degree.From the perspective of dynamic behavior strategy, the goal of manufacturers is to maximize the sum of the present value of cross period profits. For manufacturers who only have short-term market power, if they use market power, their gains will be offset by the subsequent losses. Worse still, the losses exceed their gains.Therefore, manufacturers with short-term market power can only use market power cautiously to prevent the situation that many new manufacturers enter.An additional advantage of having short-term market power is that manufacturers can have the ability to maintain market stability and make decisions conducive to themselves in some short-term situations.However, the existence of long-term market power will make manufacturers gain additional benefits and causeResource allocationLow efficiency.Misjudgment of long-term and short-term market power will have different consequences. If short-term market power is judged as long-term market power, the result is likely to be manufacturersmarket shareIf the long-term market power is judged as short-term market power, the manufacturer cannot gain additional benefits from its own market power.The difference between short-term market power and long-term market power shows thatMarket entryThe influence of conditions on market power andMarket performanceImportance of impact.
Market forces are divided into defensive market forces and offensive market forces.It is also important to understand the relationship between market power and market performance.Defensive market power refers to the ability of a manufacturer to resist attacks from other manufacturers, which must be credible and real.For example, one with short-term market power and goodFinancial resourcesA manufacturer may think that it is better for its long-term interests to act according to its past behavior, so it will not take the initiative tosupplierUse market power with customers to strive for additional benefits andmarket shareHowever, if the competitors take offensive actions, the manufacturers will have enough strength to take antagonistic strategies to resist the attacks of the competitors.From this point of view, the existence of defensive market forces has the function of stabilizing the market, for example, inOligopoly marketOn the one hand, it is easier for manufacturers to agree not to startprice warBecause the result of the confrontation is likely to be both losers.Aggressive market power refers to the ability of manufacturers to actively expand market share or obtain additional revenue.But having offensive market power does not mean that market power is long-term.Generally speaking, manufacturers have more defensive market power than offensive market power.
recognition methods
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The following methods are used to identify or measure the market power of an enterprise:[3]
Estimation method
Price elasticity of demandyesrequirementThe ratio between the relative change and the relative change of price is used to reflectChange in demandSensitivity to price changes.If the change in demand exceeds the change in price, that is, the calculation result is greater than 1, it indicates that the former is highly sensitive and flexible to the latter;vice versa.When the demand remains the same, increase the price,Price elasticity of demandThe smaller it is, the less it is equal to 1, until it is less than 1, and finally it approaches to 0, becoming inelastic. At this time, the market power of the enterprise is the largest, making it the only monopolist in a theoretical market.It can be seen that the price elasticity of demand for market power owned by enterprises is inversely related, that is, the smaller the price elasticity of demand, the higher the level of market power.When the demand is completely elastic, the market power owned by the enterprise is zero.
lerner index
lerner index It means the price is higher thanmarginal cost The ratio of, that is, Lerner index=(price - marginal cost)/price.
Because onPerfectly competitive marketThe price in the structure is equal to the marginal cost, so its Lerner index is zero.It can be seen that the Lerner index is positively related to the market power owned by enterprises, and it is also related to the market in which it is locatedstructure type Relevant, that is, the enterprises in the perfectly competitive market have the smallest market power, and the order isMonopolistic competitive market、Oligopoly marketandTotally monopolized marketThe formation of excess profits in the completely monopolized market is related to the expansion of enterprise market power to the extreme.Its negative effect is toConsumer surplusExploitation ofMarket Failure Therefore, the effect of the "visible hand" begins to appear, and the government's "anti-monopoly" force comes into play. It can be seen that the formation of enterprise market power must not ignore the relevant actions of the government.
Cross elasticity of demand
Cross elasticity of demandIt's a commodityrequirementRelative change and anothercommodity priceThe ratio between relative changes is used to reflect the sensitivity of the demand for one commodity to the price of another commodity.If consumers believe that these two commodities are replaceable, then the cross elasticity of demand is positive.commodityCross elasticityThe higher the substitution, the weaker the market power of the enterprises producing these two commodities.It is generally used in antitrust cases to help judge whether consumers are aware of the existence of the goods in the market for a particular enterprisesuccedaneum。For example,AntitrustOur inspectors want to knowNikeExclusive productiongym shoesThe market power it has.Nike enterprises spend a lot of money on advertising, thus establishing an outstanding position in the sports shoes market.In order to understand the impact of other products on Nike shoescompetitiveness, can be calculated bycompetitorThe change of commodity price reflects the change of demand quantity of Nike shoesCross price elasticityFrom which we can know whether consumers believe that there are real competitors of Nike in the sports shoes market.
