Question

This is one discussion question that I was hoping to get guidance on:

What is the correlation between, and evidence behind, market concentration and price levels? Do you find any relationship between lack of competition and other economic variables? What are the ethical ramifications of market concentration?

Answer 1

The presence of many variables like size of the industry, growth/age, size and variability, advertisements etc., other than technological developments and innovation scauses market concentrations.Price level in general terms may be known as the cost of the good or a service, the securities of the economy. It is the average level of current prices across the entire spectrum of goods and services produced in an economy.

The study of price- concentration provide a strong evidence that there is a positive correlation between the concentration and the levels of prices.The market concentration is still endogenous that the fixed pricing models are unable to state why still some markets remain more concentrated than few others.When entry in the large market occurs more erractically on the other hand ther non-competitive market suffers from lack of entries and the price levels tend to fall steeply in smaller markets. when we assume the price levels for larger markets with the responses observed in smaller marlkets; then it would result in misleading.

Competition means an act or a situation wherein two or more firms or organizations take part in to acheive are obtain certain targeted results whereas economic variables means medium of measurement to identify how an economy is functioning. Competition encourages the productivity and international competitiveness of the business sector and promotes dynamic markets and economic growth. The economic variables include population,poverty rate , inflation etc.,There always exists a positive relationship between the lack of competition and economic varaibles because when an economy lacks competition then it would neglect all the technological developments and cost reduction efforts taken by the economy which inturn stands as a tool of measurement for the performance of economy.

The market concentration does not prove to be good all the times there may be some situations where it can be projected to have a negative impact.It is taken as of the perspective of the consumers. Take the health insurance market,* for example. It’s famously concentrated. The way the story is typically told is that a few big insurers with massive market clout are demanding excessive premium increases. But the ethics behind it is is that only when the insurance sectors are masively concentrated then the consumers can enjoy the benefits of lower hospital costs.