Revisiting the Methods for Measuring Market Power and Concentration

Governments and market competition regulators are always concerned with the smooth functioning of the ‘Markets’ and are in constant watch with respect to ‘Market Power’. The process of liberalization, privatization and globalization has brought in both good and bad consequences with them. The good part is that the consumers are able to choose products or services from a wide spectrum of competitive firms and the not so desirable part is that the market structures are getting skewed due to dominance of large players. The mergers and acquisitions are giving rise to ‘Concentrated Markets’ where the competition may be destroyed. The anti-trust law regulators are always on lookout for these types of market imperfections. In this backdrop, the present paper aims at bringing out the ways and means of exploring the market concentration. The concepts such as concentration ratios, Herfindahl-Hirschman Index and Lerner Index will be elaborated. The concept being new to the Indian context would be using exploratory method of research.