...Microeconomic Assignment | The cost of Competition | Case Analysis | Justine Liu MBA Candidate at TiasNimbas Business School | * Explain how between January and September 1997 the game changed compared to that which had existed prior to January 1997. Prior to January 1997, there were only two big players in the market of flights between Turin in Italy and Innsbruck in Austria. These two players are Air Turin and Innsbruck Air. Thus we can conclude this market was a duopoly one. There were some features in this market. First, they provided differentiated services. Air Turin flied twice-daily whereas Innsbruck Air flied once a day. And their flight schedules were never the same. Second, they avoided conflicts with each other intelligently. Air Turin did not provide Sunday services, whereas Innsbruck Air did not provide Saturday services. Third, the pricing strategies they used were similar. As table shown the fare structure all in the same currency, we can find that there was no large differences between their price. Also, they even use the same price differentiation segmentations for customer with higher or lower price elasticity. Forth, they share almost half the market. In year, 1996, Air Turin achieved an average load factor of 65 per cent, and Innsbruck Air achieved 68 per cent. The market shares for Air Turin and Innsbruck Air, recorded at December 1996 on the Innsbruck-Turin route, were 58 per cent and 42 per cent respectively. There is interesting...
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...Intel was fined a record amount by the EU for predatory pricing. Assess how easy is it to conclude that Intel undertook predatory pricing? Contents I) 1a) ‘A firm would prefer to b a monopoly, rather than be involved in a perfectly competitive market.’Discuss-------------------------------P/1-P/5 1) Market Environment---------------------------------------P/1-P/2 2) Profit Maximization----------------------------------------P/2-P/5 3) Benefits on Research & Development -------------------P/5 II) 1b) In May 2009 Intel was fined a record amount by the EU for predatory pricing. Assess how easy is it to conclude that Intel undertook predatory pricing?----------------------------------------------------------------P/6-P/8 III) Reference & Bibliography---------------------------------------------P/9 Business Economics Assignment (UBNo.: 09034262) P/8 1a) ‘A firm would prefer to be a monopoly, rather than be involved in a perfectly competitive market.’ Discuss. A monopolist has sufficient control over the services or products its provides in determine significant terms in order to maximize profits. This is directly contrast a firm operating within perfectly competitive market. To a large extent, a firm would prefer to be a monopoly. If a firm can be a monopoly, they can have following three advantages over doing business in perfectly competitive market. 1) Market Environment The best way to compare two extremes market structures - monopoly and perfect competition by following...
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...Introduction…………………………………………………………………………………….4 Oligopolistic Competition……………………………………………………………………...5 Characteristics of an Oligopoly…..………………………………….………………………....6 Models of Oligopoly Behavior…………………………………………………………………9 Conclusion….………..………………………………………………………………………...11 References……………………………………………………………………………………..12 Abstract The goal of this research paper is to provide an overview of the theory of oligopoly and its effect on the global economic stage. We will review what results when there are fewer companies in a particular marketplace. We will also review the various barriers commonplace to oligopolies. Finally, we will address the various theories of oligopoly and their application in the global economy. Introduction There are four basic kinds of market constructs; monopoly perfect competition, oligopoly, and monopolistic competition. This paper will review the market structure known as oligopoly. The term oligopoly can be defined as a type of market structure that has a small number of participants that offer a particular product or service within the marketplace (Salvatore, 2007). The etymology of the word oligopoly is cryptic except for its initial appearance in 1518 in the Latin version of one of the most important works of European humanism, Thomas More’s Utopia (Chamberlin, 1957). The word oligopoly itself is actually derived from the Greek word monopoly which means to sell according...
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...Chamberlain (1933) o Idea: Firms have same markets power but make zero profits o Face downward sloping demand curve o Free entry drives profits to zero o Representative consumer: views all brands as equally good substitutes for each other (symmetric) o With differentiated products implies preference for variety Undifferentiated Products • Cournot model w/ fixed costs and free entry • Entry implies zero profits • P = AC • # of firms determined by how many required to drive price down for AC • As fixed cost declines more firms enter and price approaches MC • Graphical Example, cost functions o Welfare: to get efficient outcome, need to subsidize one firm and force to charge MC o Tradeoff: more firms drive price down, but increases expenditure on fixed costs o Best thing you can do without subsidizing firms, is to restrict entry • Behavior of firms still to produce here MR= MC • Residual demand is more complicated • Algebraic examples • Equilibrium (cournot?) under monopolistic competition has two problems o Price not equal to MC o Number of brands (variety) is not optimal o Show: fixed costs lead to too little variety Suboptimal Product Variety • Graphical examples of Brand X and...
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...Unclassified Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development DAF/COMP(2014)14 06-Jun-2014 ___________________________________________________________________________________________ English - Or. English DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE DAF/COMP(2014)14 Unclassified AIRLINE COMPETITION -- Background Paper by the Secretariat -18-19 June 2014 This document was prepared by the OECD Secretariat to serve as a background note for Item IX at the 121st meeting of OECD Competition Committee on 18-19 June 2014. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. More documents related to this discussion can be found at http://www.oecd.org/daf/competition/airlinecompetition.htm. English - Or. English JT03358883 Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. DAF/COMP(2014)14 TABLE OF CONTENTS Introduction ................................................................................................................................................. 3 1. Features of the airline industry .............................
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...WORKING PAPER NO. 85 ANTI DUMPING LAW AND PRACTICE: AN INDIAN PERSPECTIVE ARADHNA AGGARWAL APRIL, 2002 INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS Core-6A, 4th Floor, India Habitat Centre, Lodi Road, New Delhi-110 003 Contents Foreword ................................................................................................................................ i I II Introduction ................................................................................................................1 Antidumping Law and Practice : Economic Perspectives .........................................4 II.1 II.2 II.3 II.4 Consumer welfare argument.....................................................................................6 Strategic Trade Policy Argument ...........................................................................21 Optimal Tariff Argument........................................................................................24 Political Economy Argument : Preliminary Evidence............................................29 III Anti Dumping Law and Practice : Legal Perspectives............................................33 III.1 III.2. III.3 Methodological Aspects .........................................................................................33 Other Procedural Issues ..........................................................................................56 Institutional aspects ...................................
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...the adjustments made to the approximate price level on the basis of discounts, allowances, and geography. Discuss the laws and regulations affecting specific pricing practices. LO4 1-3 Arriving at the Final Price The TATA NANO The Car Priced at one Lakh 1-4 Opening Story – The NANO Car FIGURE 14-1 The six steps in setting price. The first three steps were covered in Chapter 13 and the last three steps in Chapter 14. LO1 1-5 Elements making up a Price – Recap of Chapter 13 FIGURE 14-2 Four approaches for selecting an approximate price level LO1 1-6 Establishing an ‘Appropriate Price Level’ Selecting an Appropriate Price Level Demand-Oriented Pricing Approaches Skimming Pricing Penetration Pricing Price Lining Prestige Pricing LO1 1-7 Establishing an ‘Appropriate Price Level’ FIGURE 14-3 Demand curves for two demand-oriented pricing approaches LO1 1-8 Establishing an ‘Appropriate Price Level’ Selecting an Appropriate Price Level Demand-Oriented Pricing Approaches Odd-Even Pricing Target Pricing Bundle Pricing Yield Management Pricing LO1 1-9 Establishing an ‘Appropriate Price Level’ Selecting an Appropriate Price Level Cost-Oriented Pricing Approaches Standard Markup Pricing Cost-Plus...
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...| | Have supermarkets become too big to the extent that they are damaging competition? Executive Summary Table of Contents 1. Introduction 3 2. Economic Structure 4 3. Non-Price Factors 7 4. Legal Framework and Political Structure 8 5 Conclusion 9 6 Recommendations 9 7 References 9 8 Appendices 9 1. Introduction 2.1 Purpose The purpose of the report is to decide whether supermarkets have become too big to the extent that they are damaging competition by explaining and analysing the changes in legal framework and economic and political structure that has enabled them to become dominant in UK grocery retailing. 2.2 Supermarkets background: The first supermarket opened in the UK after World War 2 (1948), which introduced the cheap agricultural food revolution. Today there are several different supermarkets and grocery stores all over the UK. In the supermarket industry the most dominating firms are Tesco with 30.4% of the market share, Asda with 16.6% of the market share, Sainsbury with 16.2% market share, and Morrisons with 11.2% market share. All these supermarkets opened their first self-service stores during 1950 – 1963. Joanna Blythman, SHOPPED The shocking power of Britain’s Supermarkets (2004: 4) states that ‘in 1950, supermarkets had only 20 per cent of the grocery market while small shops and traditional Co-ops had 80 per cent between them’. The average size of the Big 4 supermarkets has increased significantly in the past...
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...can be considered a cliché. Companies like Valeant, Turning and even Johnson and Johnson, have all been in the news over unethical business practices whether they be price gouging, monopolization or product misrepresentation; each of these circumstances has caused an uproar from consumers and even federal government agencies are now beginning to investigate these companies for wrong doing. Valeant Pharmaceuticals is the most recent perpetrator of predatory pricing; on February 10, 2015 Valeant purchased the rights to a pair of life saving heart drugs Nitropress and Isurprel, on that same day the price rose 525% and 212% respectively (Rockoff & Silverman. 2015, p.1). Internal and External Environment When a company makes a decision like this, many internal and external factors much be evaluated before deciding to push forward. P.E.S.T.L.E. Analysis The relevant external factors affecting this industry are primarily the Political, Economic, and Legal forces. Political | * Hiliary Clinton attacking Valeant for predatory pricing. * Testifying in front of Congress for the severe price hikes of Nitropress and Isuprel * Potential loss of $300 million a year if congress forces Valeant to revert to original prices | Economical | * “Duty is to maximize profit of all products “(Rockoff & Silverman, 2015, p.3) * Company had a net debt of $30 billion, which fueled their serial acquisitions of patents (Dumortier, 2016, p. 5) * Increased pressure from shareholders...
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... Since the turn of the century, Europe’s economic prosperity has rested upon the European Union’s competition policies and regulation of abusive market structures and anti-competitive behaviour. The last fifty years have illustrated that open markets foster innovation and efficiency, while delivering Europeans higher quality products and services at lower prices. This will ultimately lead to Europe’s economic growth, despite the possible infiltration of foreign low cost, low skill producing firms. Suggesting Europe’s future shift towards a knowledge based economy with a focus upon the development and sharing of new technologies (Bannerman, 2002). The following paper will examine the EU’s role and approach towards competition policy with a focus on the economic implications. Abusive market structures and anti-competitive behaviour have been battled by the EU to preserve competition, fearing that cartels will exploit their pricing power to damage consumers. The magnitude of the damage is directly correlated to the elasticity of demand, where a strongly inelastic customer would suffer due to the unavailability of substitutes. Furthermore, anti-competitive market structures create barriers to entry through the ownership of resources, economies of scale, and predatory pricing that stunt future innovation and efficiency. To ensure this competitive environment, the EU utilizes anti-trust laws, merger control, and state aid rules. According to the EU...
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...International Marketing Challenge As in case of Dominoz, the product completely deviates from local teastes and customs in china. International markets offer vast opportunities for firms with a product or service in high demand. Howeer globalization also brings about intense competition in markets that in the past have been domincated by domestic firms. Newness, cultural adaptation, attractiveness, and appropriate marketing strategies can help tremendously. Following are the factors for success in international markets: 1. Accurate assessment of market potential 2. Selection of right product mix 3. Appropriate adjustment in distribution 4. Pricing 5. Packaging 6. Advertising Assessing Market potential To assess market potential, firms seek to identify the aggregate demand for a product and estimate the costs associated with product introduction and distribution. Population growth provides a coarse estimate of future market potential and so do consumption patterns, which are dynamic. Accessibility, profitability and market size all play a major role in deciding market priority. Globalization and Localization in International Markets Striking a balance between globalization and localization is a key challenge. Lack of marketing globalization has proved to be detrimental to performance; however the same is true for indiscriminate standardization of marketing practices without attention to localization forces. Generally, the more closely defines the market...
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...Question 1 a) The type of market structure the automobile industry belongs to monopolistic competition. The characteristic of this market is that they are freedom of entry and exit. Second is they are similar, but not identical goods. b) The reason that the drop in the sales of cars early year is because the election in May, there were rumors about the price reduction for other cars. In reason of the price of the other cars decreasing, the sales of Mercedes-benze E-class was dropping. c) The two factors that would attract the customers to buy the new E-class sedan Model are sporty and dynamic looks, because it will make purchaser attention in reason of it attractive outlook. Second factor is about the innovative of the safety technologies, because of the modern technology of this product, it makes a lot purchaser feel curios so it could be the factor of would attract the customers. d) The consequence that government cut the petroleum subsidy, the demand for car will decrease, in reason of petroleum and car are complementary good. complementary good is define as a good whose use is related to the use of an associated or paired good. Therefore it might effect the demand of car. According to the diagram 1, when the price of petroleum increase, the quantity demand of petroleum will decreasing, because it is negative relationship. Besides, base on the diagram 2 showing that the demand of cars. When the price of petroleum increase, the demand of cars are affected, as...
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...[pic] MARKETING PLAN FOR BARILLA (Section I: The Business) Company Description Located in Parma, Italy is the main headquarter of the Barilla group. The “Barilla group was founded in 1877, by Pietro Barilla Senior. He opened a bread and pasta shop in Parma in strada Vittorio Emanuele” (Barilla G. e R. Fratelli S.p.A., 2012). The Barilla group is located in 20 countries. They transport their product to over 100 countries, and have 13 manufacturing plants in Italy and 30 manufacturing plants in other countries. The corporate office for Barilla America is in Bannockburn, Illinois (Barilla G. e R. F.lli S.p.A., 2012). One of the well-known products of Barilla is their pasta sauce. Barilla pasta sauce is one of most popular pasta sauce in the world. Barilla has many flavours of pasta sauce. This marketing plan will present a new idea for a garden vegetable flavour pasta sauce. This flavour will be a great addition to the many other flavours. Business Mission According to the Barilla group (2012) website, the business mission is “We help People live better by bringing wellbeing and the joy of eating into their everyday lives” (Barilla G. e R. Fratelli S.p.A., 2012). Company Values According to the Barilla America website, the slogan for the pasta sauce is, “Real taste comes from real vegetables” (2010). In the ethics and business report the company’s ethical and corporate responsibilities are as follows: ...
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...Growing use of the internet Computer ownership and internet access in UK households has increased significantly over the past five years. In January 2005, 62 per cent of households in Great Britain could access the internet at home compared with only nine per cent in 1998-99 (Office of National Statistics (ONS), Expenditure and food survey, 2005) Broadband connections now account for about 60 per cent of all connections (ONS Survey of Internet Service Providers, 2005). Alongside this growth in household high-speed access to the internet there has been a very rapid growth in internet shopping. In 2004 internet sales made to UK households by UK non-financial sector businesses were valued at £18.1 billion, an increase of 68 per cent on the previous year. This compares with sales of around £3 billion in 2000 (ONS Annual e commerce survey, 2004) Trade comment suggests that rapid growth has continued in 2005 (Interactive Media in Retail Group (IMRG), e-retail, 2005) However a recent Mintel survey paints a more cautious picture suggesting that the rate of growth in internet sales, while continuing, has slowed down and is now largely in line with growth in consumer internet connections (Mintel Internet Quarterly, 2005 ). The same Mintel report notes that the Internet has not transformed the face of retailing to quite the extent predicted five years ago but that it is continuing to establish itself as something more than just a niche retail channel. In this respect, it is obviously...
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...www.economicshelp.org/ You are welcome to leave feedback and ask further questions on Economics at: www.economicshelp.org/blog Richard Tejvan Pettinger 29 Campbell Road mail@richardpettinger.com www.economicshelp.org 2 AQA Edexcel OCR • • • • • • • • • • • • • • • • • • Unit 5 Unit 4 Unit 4388 Costs Law of Diminishing Returns Economies and Diseconomies of Scale Production Decisions The Objectives of Firms Efficiency Competitive Markets Oligopoly Contestable Markets Monopoly Competition Policy Price discrimination The Labour Market Poverty and Alleviation of Poverty Market Failure Cost Benefit Analysis Privatisation Regulation of Privatised Industries www.economicshelp.org 3 Costs • • • • • • • • Fixed Costs: Variable Costs: Total Costs: Marginal Cost: Sunk Costs: These are fixed costs that do not vary with output. E.g. cost of building a factory These are costs that do vary with output E.g. electricity, raw materials Fixed + variable costs This is the cost of producing an extra unit These are costs that are not recoverable e.g. advertising = = = TC / Q VC / Q FC / Q Average Total Cost (ATC) Average Variable Cost (AVC) Average Foxed Costs (AFC) The Law Of Diminishing Marginal Returns • • • Total Product (TP) Marginal Product(MP) This is the total output produced by workers This is the output produced by an extra worker Diminishing Returns occurs in the short run when one factor is fixed (e.g. Capital) If the variable factor of production is...
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