Competition Policy Theory And Practice - 1477 Words

Market Power 1. Introduction With the development of economics, market power is a heated topic. Motta (2005) states that market power refers to the ability of firms to set prices above marginal costs in the book called Competition Policy: Theory and Practice. George A. Hay thinks â€Å"The modern concept of the market power focuses on the potential for consumers to suffer injury through the actions of a single firm or a group of firms acting in concert†(1991) in his essay about market power in antitrust. Market power is one of the standards that can measure whether a firm is a monopolist or a competitor. Generally, a monopolistic firm has high market share and possesses large market power in its industry. A typical instance is that both of Staples and Office Depot have great market power with high market share. Both of them are large United States office supply chain stores. Based on the following graph, it is easy to find that the annual sales of Staples and Office Depot are much greater than their rival, OfficeMax, given that both of the annual sales of Staples and Office Depot are more than $10 million but that of Officemax is approximately $7 million. It implies that they have more market power than other office supply stores, which illustrates that they have the power to master the market price of stationery. Source: Staples, Office Depot and OfficeMax Company websites and SEC filings Figure 1 Comparison of number of store and annual sales among Staples, Office DepotShow MoreRelatedThe Role Of Competition Law And Its Effects On The Local Market And South African Economy Essay1380 Words   |  6 PagesMy interest in this paper is to consider a complex network prospective; the application of Competition Law, and more specifically related to its effects on monopolistic competition, and its effects on the local market and South African economy as a whole. 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