KEY TERMS
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
minimum resale price maintenance agreement an agreement that requires a dealer who buys from a manufacturer to sell for at least a certain minimum price
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