Correlation Between and Evidence Behind Market Concentration and Price Levels

Market Concentration and Price Levels
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Market Concentration and Price Levels
Market concentration entails the situation that occurs when small firms account for a significant percentage of the market (Bennett, 2022). Price levels are the average costs for all products and services offered in the market. The correlation between market concentration and price levels is the pricing strategies. For example, in an oligopoly market characterized by a few firms that dominate the market and set prices interdependently, other economic variables make these enterprises compete. If large firms continue to gain more market share, it means that the market is highly concentrated.
Specifically, there is a relationship between the lack of competition and other economic variables. If there is no competition in a specific market, such as oligopoly, the available small group of enterprises create other economic variables, which are more favorable to regulate the industry. Besides, competition obliges firms to invest in new products so that they can retain existing customers and attract new ones (Ip, 2015). For example, these firms can use newer technologies, which new entr...