In an IMF blog contribution, an approach to evaluate Corporate Power is suggested. Generally, the authors
find that rising corporate market power has had a fairly limited negative economic impact so far. But, if left unchecked, it could take a bigger toll on growth and people’s incomes in the future.
The authors suggest to use the so called price-markup, the price difference between what a company charges over the actual production costs as an indicator of market power.
The authors highlight the following development:
Since the early 2000s, rising markups have contributed to some reduction in companies’ investment—a key ingredient to sustained growth. As a company’s market power increases, it can widen its profits by charging a higher price and reducing its output. This, in turn, leads the company to reduce its demand for capital and, therefore, its investment.