Market Efficiency

Posted in Marketing and Strategy Terms, Total Reads: 263

Definition: Market Efficiency

The elements of market efficiency can be stated as follows:

Competition and the number of market participants:

Greater the number of buyers and sellers participating in the transactions or greater the competition, the market efficiency increases.

Transfer of ownership and the balance of market power:

The party which has greater knowledge has the greater power over deciding the terms of sale i.e. the terms of transfer of ownership. In an efficient market, both parties are well equipped with information so that balance of power is easily maintained.

Efficiency of price formation:

Efficient pricing of products occur when large number of buyers and sellers take part in the transaction and possess same information about the market.



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