MARKET POWER

Capability of a company to control price of an item’s supply, demand, or both. A firm can manipulate the price to its advantage. Regarded as price makers, they can set the price of a product while maintaining its market shares. In a perfect competition, all companies in the market have zero market power, hence, they accept the present market price without exercising control over the prices. But in every market, some companies have varying levels of market power. In general, it refers to the amount of influence that a business has on the industry where it operates.