MARKET CONCENTRATION Meaning and
Definition
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Market concentration refers to the degree to which a particular market is dominated by a small number of firms or companies. It is a measure used to analyze the level of competition within an industry or market segment. Market concentration is often determined by specific metrics or indicators, such as the market share of the leading firms, the number of firms in the market, or the Herfindahl-Hirschman Index (HHI).
When market concentration is high, it signifies that a few firms have a significant share of the total market, while the remaining firms play a relatively smaller role. This kind of concentration can result from various factors, such as economies of scale, barriers to entry, or mergers and acquisitions. High market concentration may indicate limited competition, which can lead to higher prices, reduced choices for consumers, and potentially anti-competitive practices.
On the other hand, low market concentration suggests a more competitive market environment, with multiple firms having relatively equal market shares. This kind of market structure may result in lower prices, increased innovation, and a wider variety of products or services available to consumers.
Market concentration is an important consideration for regulators, policymakers, and antitrust authorities, as it can have implications for market efficiency, consumer welfare, and overall economic health. Monitoring and managing market concentration is crucial to ensure fair competition, prevent the abuse of market power, and promote innovation and consumer choice.
Etymology of MARKET CONCENTRATION
The etymology of the word "market concentration" can be broken down as follows:
1. Market: The word "market" has its origins in the Latin word "mercatus", which means trading, buying, or selling. This Latin term evolved into the Old English word "mearcet", referring to a meeting or gathering place for buying and selling goods. Over time, "mearcet" transformed into "market" in Modern English, retaining its original concept of a place where goods and services are exchanged.
2. Concentration: The word "concentration" comes from the Latin word "concentratio", which means the act of bringing together or gathering into one point or place. This Latin term consists of two parts: "con-" meaning "together" and "centrum" meaning "center".
