What is the relevant market?

In order to understand the relevant market term, it is important that we consider two versions: that of the consumer and that of the producer. We speak of a relevant market when products or companies are offered that are very similar (they are close substitutes) and there is close competition.

It is important that we take into account the two versions that we have discussed: on the one hand, what the consumer thinks they could be substitutes; and, on the other hand, from the point of view of a company the goods and services or other companies that can manufacture the same or with very similar characteristics.

The relevant market could help a company or a consumer find the limits of the markets, the power it exercises over it and the competition, and the consequences that their actions have on consumers. This is because among the products that are substitutes, the existing competition is much greater, so that sometimes consumers are affected (for better or for worse).

And how is the relevant market established?

As we have said, the relevant market is measured or established by substitution and, for this, we return to the two versions from before:

  • From the consumer's point of view: there are two substitution products that can bring us the same benefits or functions as others.
  • From the point of view of companies: it depends on the ease with which they can offer those products (there are no entry barriers).

In this way, we will be able to establish the relevant market that we want to know: substitution is a key point that we cannot ignore, and that we must study in detail to determine which are the markets in which they play our competitors.

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