Under what circumstances would a large market share identify market power? Under what circumstances is a large market share not a good indicator of market power? Give a specific example of each

Marketing Jan 14, 2021

Under what circumstances would a large market share identify market power?

Under what circumstances is a large market share not a good indicator of market power?

Give a specific example of each.

Expert Solution

Market power with a firm exists when the price of products of that firm exceeds the marginal cost and long-run average cost of producing goods. The firm with market power can control the market price or quantity sold in the market. To establish the market power the large market share is only sufficient. The firm with the market share above 50% is said to possess market power in the market.

The market share with above 25% does not possess market power.

The monopoly firms are the example of possessing market power. Various hotels and restaurants also have great market power.

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