Markaðsvaldið

Markaðsvaldið, or market power, refers to the ability of a firm to profitably raise the market price of a good or service over its marginal cost. This power is typically exercised by firms that hold a significant share of the market. The presence of market power is a key characteristic of imperfect competition, differentiating it from the theoretical ideal of perfect competition where no single firm can influence prices.

Firms with substantial market power can often dictate terms to buyers and suppliers, leading to potentially higher prices for consumers and lower prices for suppliers compared to a competitive market. This can manifest in various forms, such as monopolies (a single seller), oligopolies (a few dominant sellers), or monopolistic competition (many sellers with differentiated products).

The degree of market power a firm possesses is influenced by several factors. These include the number of competitors, the degree of product differentiation, barriers to entry for new firms (such as high startup costs, patents, or regulatory hurdles), and the elasticity of demand for the product. When market power is concentrated in the hands of a few firms, it can lead to concerns about economic efficiency, innovation, and consumer welfare, often prompting regulatory oversight.