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You really want 100s of competitors. If they’re running advertisements they’re exploiting market power.
by ianai 4y ago
You really want 100s of competitors. If they’re running advertisements they’re exploiting market power.
- Animats 4y agoI need to find the reference, but an European Union antitrust study indicated that price competition usually disappears around when the number of real competitors drops below 4. Below 4, you tend get implicit collusion, where nobody wants to cut prices much to gain market share.
- ianai 4y agoAn efficient market doesn’t have price competition because MR=MC. Price above the margin and nothing sells. Price below and you’re losing money-and no one has money to lose for market power. I realize I’m talking about markets people would have a difficult time looking for examples. This illustrates how wide spread concentration is. I’m not concerned with the N=M inflection points.