Browse Definitions :
Definition

market distortion

Contributor(s): Matthew Haughn

Market distortion is the lack of free and open competition in a market, whether through intentional actions or prevailing market conditions. Further distortion occurs when governing bodies step in to regulate the market, for example by setting price floors or ceilings or offering tax subsidies.

A market may become distorted when a single business holds a monopoly or when other factors prevent free and open competition. This distortion causes problems for consumers as well as for private sector businesses following standard procurement procedures. A lack of competition typically means higher prices.

A monopoly may exist because of a lack of competition or not enough strong competitors. An effective monopoly situation can arise in a number of ways:

  • Intellectual property ownership can prevent other suppliers from filling a need.
  • Customers may specify source requirements.
  • There may be prohibitive costs for switching suppliers. 
  • A lack of technically acceptable solutions may exist among competitors.
  • Company policies may form barriers to businesses or international suppliers.

A distorted market also can result when multiple companies form cartels to intentionally control markets instead of competing with one another.

This was last updated in June 2016

Continue Reading About market distortion

Join the conversation

2 comments

Send me notifications when other members comment.

Please create a username to comment.

What is a cartel?
Cancel
A cartel is a group that's organized around a specific purpose; the term often refers to a small group of businesses that form some kind of organization to regulate prices.
Cancel

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • compliance audit

    A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines.

  • regulatory compliance

    Regulatory compliance is an organization's adherence to laws, regulations, guidelines and specifications relevant to its business...

  • Whistleblower Protection Act

    The Whistleblower Protection Act of 1989 is a law that protects federal government employees in the United States from ...

SearchSecurity

  • reverse brute-force attack

    A reverse brute-force attack is a type of brute-force attack in which an attacker uses a common password against multiple ...

  • orphan account

    An orphan account, also referred to as an orphaned account, is a user account that can provide access to corporate systems, ...

  • voice squatting (skill squatting)

    Voice squatting is an attack vector for voice user interfaces (VUIs) that exploits homonyms (words that sound the same but are ...

SearchHealthIT

SearchDisasterRecovery

  • business continuity policy

    Business continuity policy is the set of standards and guidelines an organization enforces to ensure resilience and proper risk ...

  • business continuity and disaster recovery (BCDR)

    Business continuity and disaster recovery (BCDR) are closely related practices that describe an organization's preparation for ...

  • warm site

    A warm site is a type of facility an organization uses to recover its technology infrastructure when its primary data center goes...

SearchStorage

  • RAM (Random Access Memory)

    RAM (Random Access Memory) is the hardware in a computing device where the operating system (OS), application programs and data ...

  • primary storage (main storage)

    Primary storage is the collective methods and technologies used to capture and retain digital information that is in active use ...

  • cache memory

    Cache memory, also called CPU memory, is high-speed static random access memory (SRAM) that a computer microprocessor can access ...

Close