What's it: Government intervention refers to the government's deliberate actions to influence resource allocation and market mechanisms. It can take many forms, from regulations, taxes, subsidies, to monetary and fiscal policy. In some cases, the
Market Structure
Price Taker: Meaning, Characteristics, and Examples
What's it: A price taker refers to a firm that cannot influence market prices and can only set an output price at the market price. All firms in perfect competition are price taker.Conversely, in imperfectly competitive markets, some firms
Strategic Entry Barrier: Concept, Types, Examples
What's it: Strategic entry barrier is actions taken by existing companies (incumbents) to deter new players from entering their market. It can take various forms, such as limit pricing, product differentiation, and loyalty schemes.Another term
Barriers to Entry: Types, and Impacts on Competition
What's it: Barrier to entry is an obstacle that prevents or minimizes the opportunities for a new company to enter a market. A barrier arises because it is deliberately created by existing companies (incumbents) through predatory pricing and
Herfindahl-Hirschman Index: Concept, How to Calculate, Pros and Cons
What's it: Herfindahl-Hirschman Index (HHI) is a measure of market concentration. You compute it by summing the squares of each firm's market share in the industry. This is an alternative to the n-firm concentration ratio.This index is important
Nash Equilibrium: Meaning, Concept and Examples
What's it: Nash equilibrium is a game theory concept that determines the optimal solution in non-cooperative competition in which each player has no incentive to change their initial strategy. John Nash, an American mathematician, put it in
Collusion: Meaning, Influencing Factors, Types, Pros and Cons
What's it: Collusion is tacit cooperation or agreement to deceive others and achieve mutual benefits for the parties involved. Such agreements exist to avoid direct competition, reduce market uncertainty, and achieve higher profits. Collusion is
Monopoly Power: Meaning, Sources, and Effects
What's it: Monopoly power refers to a firm's ability to influence market prices. It is weak when the market is made up of many players, and products are relatively homogeneous. Market power is higher when firms operate under an oligopoly, where the
Market Failure: Types, Effects, and Solutions
What's it: Market failure refers to a condition in which the market mechanism doesn't work, thus creating inefficiency in the market. Demand, supply, and price aren't in equilibrium. As a result, markets fail to allocate economic resources most
Externalities: Meaning, Types, and Solutions
What's it: Externalities are costs or benefits of economic activities borne by third parties who are not involved in it. They are not reflected in the final cost or benefit of the goods or services produced.Economists view externalities as
Cartel: Goals, Examples, Characteristics, Effects, and Reasons for Failure
What's it: A cartel is a formal agreement between several parties to increase economic benefits. It can appear on both the market demand and supply sides, although the latter is more common.Cartel objectivesA cartel is a form of
Cournot Model: Concept, Assumption, Solution, and Criticism
What's it: A Cournot model is one of the economic models to explain the oligopoly market. This model assumes that the firm independently decides the profit-maximizing level of production. I mean, they don't depend on how many competitors are