What is Shakespeare's concept of tragedy?
Shakespeare inherited his concept of tragedy from ancient Greece and Rome, as well as contemporary writers that wrote just before him or simultaneously with him. Tragedy should involve a tragic figure with great power. The figure must possess enough power to do great harm. The average individual doesn't have that kind of power, so a member of royalty usually serves as the tragic figure.
This tragic figure must possess a tragic flaw that leads to his downfall. Ambition, for example, is Macbeth's flaw. Hamlet's inability to act is his. If Hamlet were more single-minded and had achieved his revenge as soon as he was sure Claudius was guilty, the tragedy at the conclusion of the play could have been avoided.
Macbeth is a more traditional tragedy, more classical. Hamlet, however, transcends the traditional. Shakespeare takes what he inherited from others and goes beyond it in Hamlet by creating a tragic character who is extremely complex.
Finally, the tragedy should create a cleansing, a catharsis, not only in the play's setting (Denmark in Hamlet), but in the audience.