Managerial Economics

Seller Concentration

Sellers in oligopolies can limit competition by driving out competitors, blocking entry by new competitors, or cooperating with other sellers with market power to keep prices higher than would be the case in a market with strong price competition. In order for sellers to exercise market power, either the market will have fairly few selling firms or there will be some selling firms that account for a large portion of all the market sales. When this happens, the market is said to have high seller concentration. Although high seller concentration in itself is not sufficient for exercise of seller power, it is generally a necessary condition and constitutes a potential for the exercise of seller power in the future. In this section, ...