Transient Market Power of Firms

Every firm in the market for industrial products offers a distinct value to consumers. As such, they derive some market power based on the intrinsic value of their products. However, firms often utilize non-price strategies to reveal value to consumers because both the consumers and firms experience information asymmetry with respect to such value. They may also orient some strategies to increase their market share. In general, non-price strategies contain information about value beyond the market shares they achieve, and the shifts in market demand provide the firm with some transient market power. This book indicates that, given the transaction costs to the consumers, of switching between products, the increase in demand tends to be of a longer-term nature. It will not be eliminated over time, as is often conjectured. Measures of the intrinsic value of products, transient market power, and the changes in non-price strategies of firms that tend to perpetuate it are also defined and estimated in the text.