Market Power

The ability of a firm to set prices above the competitive equilibrium without losing all of its customers. Traditionally attributed to scale economies, switching costs, network effects, or intellectual property. A core concept in antitrust law and competition policy—abuse of market power is subject to regulatory action when it harms consumer welfare.

Huang et al. (SSRN, 2026) extend the concept to algorithmic contexts, demonstrating that e-commerce ranking algorithms confer market-power-equivalent advantages on top-ranked sellers through attention concentration—without those sellers meeting any traditional market-power preconditions. In the attention economy, rank itself becomes a source of market power, raising questions about whether platform regulation should treat ranking algorithms as market-power-granting mechanisms.