what is market power 
market power refers to a company s relative ability to manipulate the price of an item in the marketplace by manipulating the level of supply demand or both in doing so such a company can thereby control its profit margin and possibly the ability to increase obstacles to potential new entrants into the market firms that have market power are often described as price makers because they can establish or adjust the marketplace price of an item without relinquishing market share market power is also known as pricing power in a market where many producers exist that compete with each other to sell a similar product such as wheat or oil producers have very limited market power understanding market powermarket power can be understood as the level of influence that a company has on determining market price either for a specific product or generally within its industry take for instance apple inc in the smartphone market although apple cannot completely control the market its iphone product has a substantial amount of market share and customer loyalty so it has the ability to affect overall pricing the ideal marketplace condition is what is referred to as a state of perfect competition in which there are numerous companies producing competing products and no company has any significant level of market power in markets with perfect or near perfect competition producers have little pricing power and so must be price takers of course that is merely a theoretical ideal that rarely exists in actual practice many countries have antitrust laws or similar legislation designed to limit the market power of any one company market power is often a consideration in the government approval of mergers a merger is unlikely to be approved if it is believed that the resulting company would constitute a monopoly or would become a company with inordinate market power the scarcity of a resource or raw material can play a significant role in pricing power even more so than the presence of rival providers of a product for example various threats such as disasters that put the oil supply at risk lead to higher prices from petroleum companies despite the fact that rival providers exist and compete in the market the narrow availability of oil combined with the widespread reliance on the resource across multiple industries means that oil companies retain significant pricing power over this commodity an example of market power