Market power

This chapter explores the causes and consequences of market power—the ability to charge prices higher than the competitive equilibrium price. Monopoly, monopolistic competition, oligopoly, and cartels are market structures characterized by market power. Examples from agriculture include the international wheat trade, major beef packers, and fruit and vegetable marketing orders. This chapter also explains how buyers (consumers) interact with firms characterized by different market structures. Game theory is used to demonstrate how economic models can be made more useful by incorporating the actions and reactions of other firms into the model.