MGT437H5 Lecture Notes - Lecture 7: Monopolistic Competition, Market Structure, Perfect Competition
Document Summary
Competitor identification begins with the following simple idea: competitors are the firms whose strategic choices directly affect one another. A market is well defined, and all of the competitors within it are identified, if a merger among them would lead to a small but significant non-transitory increase in price. Small is usually defined to be more than 5 percent, and non-transitory is usually defined to be at least one year. the. Ssnip criterion is based on the economic concept of substitutes. Markets are often characterized according to the degree of seller concentration. This permits a quick and reasonably accurate assessment of the likely nature of competition in a market. These characterizations are aided by measures of market structure. Market structure refers to the number and distribution of firms in a market. Under perfect competition market conditions will tend to drive down prices toward marginal costs when at least two of the following conditions are met: 1. there are many sellers.
