...a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[2]Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[3] The verb "monopolise" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4] A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly),...
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...Definition Price discrimination occurs when a company charges different prices to different customers for an identical product. In addition, the price difference occurs for reasons other than variations in costs. Examples: charging less for a cinema ticket bought by a pensioner as opposed to any other adult; charging more for peak time rail travel between Euston and Liverpool compared with off‐peak journeys; universities charging overseas students more for a particular course than a resident student Capturing surplus Price discrimination is a way in which producers can seek to capture more surplus than with uniform pricing. There are three key conditions that must be in place for a company to price discriminate effectively: • The firm must have market power, in other words, the firm is a price maker and faces a downward sloping demand curve. The firm does not have to be a pure monopolist. • The firm must have access to information (screeening) about consumers’ willingness to pay and how elasticities of demand vary across customers and market segments. • The firm must be able to prevent reselling (arbitrage). If the company did not have this power then customers who purchase at low prices could act as an intermediary, reselling the product (with a mark‐up) to customers who are being charged higher prices. It would then be the intermediary, rather than the producer, that would capture the extra surplus Types First‐degree...
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...Required reading for the final for chapter 12:Monopoly and price discrimination Market power alters the relationship between a firm’s costs and the price at which it sells its product to the market. Perfectly competitive firm takes the price as given and then chooses the quantity it will supply so that price equals marginal cost. By contrast, the price charged by a monopoly exceeds marginal cost. Important note on Monopoly It is perhaps not surprising that monopolies charge high prices for their products. Consumers of monopolies might seem to have little choice but to pay what ever the monopoly charges. But if so, why does copy of Window not cost $1000? Or $10,000. The reason, of course, is that if Microsoft set the price that high, fewer people would buy the product. People would buy fewer computers, switch to other operating systems, or make illegal copies. Monopolies cannot achieve any level of profit they want because high prices reduce the amount that their consumers buy. Although monopolies can control the prices of their goods, their profits are not unlimited. As we examine the production and pricing decisions’ of monopolies, we also consider the implications of monopoly for society as a whole. Monopoly firms, like competitive firms, aim to maximize profit. But this goal has very different ramification for competitive and monopoly firms. In competitive markets, the buying decisions of self-interested consumers and the selling decisions of self- interested...
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...Price Discrimination | | Most businesses charge different prices to different groups of consumers for what is more or less the same good or service! This is price discrimination and it has become widespread in nearly every market. This note looks at variations of price discrimination and evaluates who gains and who loses?What is price discrimination?Price discrimination or yield management occurs when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs. It is important to stress that charging different prices for similar goods is not pure price discrimination. We must be careful to distinguish between price discrimination and product differentiation – differentiation of the product gives the supplier greater control over price and the potential to charge consumers a premium price because of actual or perceived differences in the quality / performance of a good or service.Conditions necessary for price discrimination to workEssentially there are two main conditions required for discriminatory pricing * Differences in price elasticity of demand between markets: There must be a different price elasticity of demand from each group of consumers. The firm is then able to charge a higher price to the group with a more price inelastic demand and a relatively lower price to the group with a more elastic demand. By adopting such a strategy, the firm can increase its total revenue and profits (i...
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...Green Days Company. Green Days is a company of a standard size that manufactures organic breakfast cereal since 1985. The company has spent its initial years in creating a good brand image for itself around UK. Serving a good range of cereal to more than 7 cities in the UK has given confidence to the company. This brand serves at least 110 outlets in the UK employing 250 in each outlet. The collection includes: * Cornflakes * Mixed grains flakes * Porridge oats * Muesli * Wheat * Rice * Barley * Honey flakes * Toasted Oats * Multi Grain * Fruit and Wheat Cereal The sales have progressively been growing since the mid 1990’s and are now looking into modernising their range with a breakfast cereal, which will specifically apply to children. We are now planning to introduce its new product to be chocolate based, the target market being children. In these fast paced conditions businesses need to go in order to survive and increase their sales revenue. The cereal has to be nutritious and healthy along with tasty in order for the children to enjoy and demand for more! Current market (Organic Food Sale) Multiple retailers: 2010 = £1,252m, 2011 = £1,189.6m -5% Box schemes/home delivery/mail order: 2010 = £155.8m, 2011 = £167m +7.2% Farm shops: 2010 = £31.55m, 2011 = £30.45m -3.5% Farmers’ markets: 2010 = £17.82m, 2011 = £17.64m -1% Other independent retailers: 2010-£259.3m, 2011-£246.6m -4.9% Why did it...
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...of departure, same destination, the same snacks. Why is it people sitting next to each other on the same flight can pay such different amounts for their tickets? Airline pricing seems to be a great mystery. The airline industry refers to their pricing game as “yield management” or “revenue management.” Meaning prices on the same plane can fluctuate widely based on available seats at the time of purchase. Even though this seems to defy logic (and textbook theory), there might just be a method, an algorithm, to the madness. In a perfectly competitive market, companies would have no power to discriminate by price. Price discrimination means that one is charging different prices to different consumers, whereby price cannot be explained by the differences in cost. In this type of environment, the price of airline seats would be a posted price and would stay the same until the flight would take off. This paper will try to rationalize the price discrimination that is ongoing in the airline industry, as well as seek to prove the optimality of certain routes via several online pricing sources. To price discriminate successfully, a company must have enough market power to be able to charge over marginal cost, and product resale is nearly non-existent. Although the resale of airline tickets is possible, it involves high search costs and does not eliminate restrictions such as blackout days or time-of-day-constraints. However, the airline industry is not predictable, and usually...
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...Aggressive New Pricing Strategy Using Microeconomic Theory I. Introduction: monopolistic power as a means of getting high profits The review of the article Microsoft's Aggressive New Pricing Strategy in terms of microeconomic theory A. B. C. Microsoft as a monopolist in software industry Google as the main company’s competitor at software market Strategies taken by Microsoft to regain the competitive power and combat the global financial recession III. Conclusion: Microsoft as a company which operates at monopolistic and oligopolistic markets. 2 II. ARTICLE ANALYSIS Introduction Monopolistic power is a profit earner for many companies. It prevails in spite of the presence of government regulations against the formation of monopolistic power in the market, which brings in deformity in the competitive scenario. One of the vivid examples is the monopolistic power Microsoft has enjoyed (Burrows, 2009). A monopolist has the power to set any price they find reasonable for getting high profits. However, a monopolist cannot set both the price and quantity to be purchased at the same time. This article shows how a monopolist can charge whatever price it deems to but it is not in their power to set the quantity of the product demanded. Therefore, a monopolist must increase prices in order to gain market share. Further, a monopolist sets different prices in different places. This price discrimination depends on the demand of the product among different subgroups of the target customers...
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...Marketing principles Price discrimination Outline 1. Introduction............................................................................................................................3 2. Conditions for price discrimination........................................................................................3 3. Types of discrimination..........................................................................................................4 4. Advantages/Disadvantages of price discrimination...............................................................5 5. Economic explanation.............................................................................................................6 6. Examples of price discrimination......................................................................................7-16 7. Price discrimination in universities..............................................................................17 - 23 8. Summary.............................................................................................................................24 What is price discrimination? The goal of every business is to maximize its profits and they can achieve this goal by successfully determining the price of their products. There are many different ways to deal with determining the price of the products. All of these ways are called – pricing strategies. Price discrimination is one of many ways how companies may determine the price of their product...
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...Introduction Apple Inc. is a company with a legendary history, largely responsible for the development of personal computers. Apple was not the first company that has distributed a portable media player, but it appearance exceeded all predecessors: Apple was aware of the expansion of the Internet and it understood what his predecessors did not: that the future of the media ultimately will be linked to the development of trade on the Internet market. Being aware of the inevitability of change, Apple has applied the principle known as the "Law of Chum", which states that "commotion" destroy traditional and create new platforms ideal for more innovation, and according to that, the complex networks in order not only survive but also progress,...
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...LAW 531 - QUIZ 4 EMPLOYMENT LAW & GOVERNMENT REGULATION Save this quiz on your computer and work on it during the remainder of the week. Make sure to save your results each time you make a change as well as save the quiz with your final answers. There are 25 multiple-choice questions. Identify the letter of the choice that best answers the question. When you are sure you have answered all the questions to the best of your ability, mark your answers on the Answer Sheet provided. Submit your answer sheet to the Week 2 Quiz link under Assignments. Do not change the font and do not put in any punctuation or other marks in the answer sheet; put only the letter choice of your answer. Also, do not put any spaces before or after the letter you enter as your answer. Be sure to turn off the automatic completion function of cell entries. On the Tools menu, click Options, and then click the Edit tab. Clear the Enable AutoComplete for cell values check box. Please put only your last name on the Answer Sheet in the by writing it in the yellow space. _________________________________________________________________________ 1. Calvin works at a local grocery store to pay his way through college. His work schedule can vary from week to week. One week he works for sixty hours, and the next week he works for twenty. He asked his boss whether he is entitled to overtime at the end of the two-week period...
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...Introduction The legislation process of Anti-Monopoly Law has been indeed a long journey. The new AML is a tremendous leap forward for China, bringing China into the modern world of antitrust and competition law. The law, which aims to prevent dominance of any one company, was first proposed in 1994. But its pace was slow until 6 years later because of pressure from big state-owned companies and multinationals that had just started doing business in China. It wasn't until 2001, when China joined the World Trade Organization, did the process accelerate. In August 2007, the law was finally passed by the National People's Congress. Although the measure compromised with state-owned enterprises, which dominate industry, people tend to believe it will make way for free market competition against monopolies. It's gained a lot of praise and set a milestone in China's legal history. In our daily life, we can face several kinds of monopolistic practice, for example, if your grocery store sells you a bag of tea with the condition that you buy a pound of sugar that would be a tie-in sale. In this paper, first, I will show the detail in the China competition law, then I will specific the monopolistic practice in Price discrimination which I think we usually face most in our society, and in the last part will be the impact of the Anti-monopoly law. China competition law On 30 August 2007, after more than a decade of legislative efforts, the Standing Committee of the National People’s Congress...
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...Duopsony (duopsonist) • Example Where large buyer controls the market 2 buyers of product • • Oligopoly • More than two • Oligopsony sellers – (oligopsonist) University Education, Car manufacturers, Banks, Fast Food • Several large buyers control the market – i.e. Fast Food industry controls the meat market • Monopolistic Competition ‐ sell side • Small to Medium sized businesses 11 Types of Markets: Perfect and Imperfect Perfect Competition has the following distinguishing characteristics: • • • • Many Buyers & Many Sellers Products are Homogeneous Perfect knowledge of competitors activities ‐ i.e. symmetrical knowledge Firms are Price Takers not Price Maker • • • • Freedom of Entry and Freedom to Exit All PC firms face the same costs Price = Demand = AR= MR. Firms make an economic profit Or an economic loss • No barriers to entry Examples: The spot market for crude oil & spot market for Henry Hub natural gas. Both markets tend to approximate perfect competitive behaviour. 12 13 14 Market Structure Perfect Competition Sell Side • • Perfect Competition • Duopoly • Monopoly • Example One large seller controls market...
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...MICROECONOMICS FOR MBAS PPC CMYBLK ................................................................................................................ 10 Monopoly power and firm pricing decisions If monopoly persists, monopoly will always sit at the helm of government … its bigness is an unwholesome inflation created by privileges and exemptions which it ought not to enjoy. If there are men in this country big enough to own the government of the United States, they are going to own it. Woodrow Wilson That competition is a virtue, at least as far as enterprises are concerned, has been a basic article of faith in the American Tradition, and a vigorous antitrust policy has long been regarded as both beneficial and necessary, not only to extend competitive forces into new regions but also to preserve them where they may be flourishing at the moment. G. Warren Nutter and Henry Alder Einhorn t the bottom of almost all arguments against the free market is a deep-seated concern about the distorting (some would say corrupting) influence of monopolies. People who are suspicious of the free market fear that too many producers are unchecked by the forces of competition, but instead hold considerable monopoly power or control over market outcomes. Unless the government intervenes, these firms are likely to exploit their power for their own selfish benefit. This theme has been fundamental to the writings of economist John Kenneth Galbraith: The initiative in deciding what is produced comes not...
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...Pepsi’s Strategy in the Carbonated Soft Drinks Market Term Project MAN 385 Prof. Preston McAfee Prepared by: Valentin Angelkov Tray Black Angie Green Jerry James Erin Lutz April 30, 2003 Introduction The following paper analyzes how PepsiCo can increase profitability in the carbonated soft drink (CSD) industry. The industry is a tight oligopoly with Pepsi and its chief competitor, Coca Cola, comprising 70% of the total market. 1 Global beverage sales for PepsiCo in 2000 were $7.6 billion; however, sales growth has averaged only three to four percent in mature markets such as North America2. PepsiCo and Coke have expanded into other ready to drink beverages such as bottled water, tea, and juices in order to counter this low growth in the CSD industry; for the purpose of this paper, however, we will focus on how to affect profitability in the CSD industry. In particular, the paper will examine how current actions by PepsiCo regarding differentiation, pricing, cooperation, and complements have affected their profitability in the CSD industry. Furthermore, the paper will give specific recommendations, with an emphasis on cooperation tactics and complements. Industry Overview The industry for carbonated soft drinks is characterized by the following five forces: Threat of New Entrants – Currently, the biggest threat of entry faced by the majors is from private label manufacturers such as Cott Corporation. Private labels now hold an 8.1% share in the CSD market, the majority...
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...retail, both company behavior and consumer’s behaviors affect product prices. Consumers have shown different behaviors and impacts on market prices. In this paper, I will examine these issues. This will show how consumer behavior interacts with market behavior. I will also demonstrate how the use of price is a cue to quality, or can destroy the price-quality relationship. The first thing that I found out, by working at Home Depot is how responsive our market is to a change in price. This responsiveness is known as elasticity. I first learned this term in macroeconomics class. Products like tools, fixtures and lumber are highly inelastic. That is, regardless of whether the prices are raised or lowered, customers continue to purchase them in approximately the same quantities. Customers demand for elastic products do fluctuate with the price. A small change in prices either up or down will result in an increase or decrease in the number of units sold. Good examples of these are electronics, brand name shoes and clothing etc. The more elastic your product then the easier it is to raise your prices without hurting your sales. To increase your profits on highly elastic products rather than raising your prices you might try lowering them. Because although this reduces your profit on each unit sold the resulted increase in sales volume will probably increase your overall profits. I learned this lesson in business finance this semester. When a business sets s a price for their products...
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