Question

Give an example of an industry with firms with market power over specific groups.

Explain the mechanism of this market power and the benefit and/or detraction of this market power.

Answer 1

Ans.

- An example of market power with relative size is the automobile industry, in which a small number of large international producers (e.g., Ford and Toyota) are the leaders in the global market, and

- a number of small companies either have market power because they are niche players (e.g., Ferrari) or have market power because of their narrow range of models or limited geographical presence (e.g., Škoda).

- Similary Tesla is gaining market power in the Electric vehicle segment.

- Benefit is that they all have survived in the industry over large no of years and all of them have together raised the market share by higher penetration.

- Detraction is the technology developments and some of these players have done very badly after they could not keep up with technological advancmenents for e.g. Tesla entry has shaken the industry.