Edited by Manfred Neumann and Jürgen Weigand
The concept of market power is of central importance to any discussion of antitrust economics. In essence, market power exists when a specific firm, or a group of firms acting in combination, has sufficient control over a particular commodity to determine significantly the terms on which other firms, or individual consumers, shall have access to it. The polar models of perfect competition and pure monopoly provide useful insights into the nature of market power, however unrepresentative these models may seem to be of the real world. For these models provide a level of generality that the intermediate models – monopolistic competition and oligopoly – just cannot match. Four principal assumptions form the basis for the perfectly competitive model. The first assumption is that each firm is sufficiently small, relative to the total market for the commodity, that it cannot influence price by changes in its own rate of output. The second assumption is that the commodity of any one firm is identical, from the perception of the consumer, to that of any other firm supplying that market.
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