- acquisition
- when one firm purchases another
- antitrust laws
- laws that give government the power to block certain mergers, and even in some cases to break up large firms into smaller ones
- bundling
- a situation in which multiple products are sold as one
- concentration ratio
- an early tool to measure the degree of monopoly power in an industry; measures what share of the total sales in the industry are accounted for by the largest firms, typically the top four to eight firms
- cost-plus regulation
- when regulators permit a regulated firm to cover its costs and to make a normal level of profit
- exclusive dealing
- an agreement that a dealer will sell only products from one manufacturer
- four-firm concentration ratio
- the percentage of the total sales in the industry that are accounted for by the largest four firms
- Herfindahl-Hirschman Index (HHI)
- approach to measuring market concentration by adding the square of the market share of each firm in the industry
- market share
- the percentage of total sales in the market
- merger
- when two formerly separate firms combine to become a single firm
- price cap regulation
- when the regulator sets a price that a firm cannot exceed over the next few years
- regulatory capture
- when the supposedly regulated firms end up playing a large role in setting the regulations that they will follow and as a result, they “capture” the people usually through the promise of a job in that “regulated” industry once their term in government has ended
- restrictive practices
- practices that reduce competition but that do not involve outright agreements between firms to raise prices or to reduce the quantity produced
- tying sales
- a situation where a customer is allowed to buy one product only if the customer also buys another product