Introduction
Perfect competition is a very rare type of market and so competitive that it negates the impact any one buyer or seller could have on the market price. The products or services sold are exactly the same and are all the same price. Firms earn only a normal profit and in the event firms started to earn more than that, other firms will enter the market and drive the price level down until only a normal profit could be made. Even the technology used is the same throughout all the companies.
Monopoly
Monopoly is a sole player and a single monopoly is seen as one organization that holds 100% of a certain market share. A monopoly produces less at a higher price and decides the price of its good/service by calculating the quantity of output so that its marginal revenue would equal its marginal cost. Afterwards the monopoly would then sell its good/service at whatever price would allow it to sell exactly that quantity.
In practice monopolies are not absolute; they are usually constrained by competing. A case of this occurs when a single firm dominates a certain market, but has no pricing power because it is in a Contestable Market, “a market in which an inefficient firm, or one earning excess profits, is likely to be driven out by a more efficient or less profitable rival.” (www.economist.com)
Oligopoly
Oligopoly is when a few select firms dominate a select market. In this situation there are only a few producers but many buyers, and the action of one producer will affect the influences of other producers. (www.oligopolywatch.com) when this happens the producers can’t decide on a price like a monopoly can and they often turn into competitors. When they do compete on price, they may produce as much and ch...
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...a product or service. Just by looking at Easy Jet, you can see that competition has an affect and for them to keep their customer base they have to cut costs so demand for the service will still be there. If they don't cut flight costs then they may lose the demand to rival budget airlines. The increase in Air Passenger Duty Tax and landing charge increases also affect the company and so therefore affect customers.
Competitive advantage - to get an edge over your rivals you must adopt cost leadership strategy (producing at a lower cost), differentiation strategy (these may be color or size differences or alternatives for different market segments) and focus strategy (concentrate on different market segments).
Works Cited
• http://www.economist.com/economics-a-to-z/c
• www.oligopolywatch.com
• www.quietlyconfident.co.uk/easyjet.doc
• (www.strategicassetts.co.uk)
1. What is the difference between a. and a. Briefly explain why some governments are concerned with monopolies. Monopoly, means that a firm is the sole seller of a product without any close substitutes, controls over the prices the firms charge. Government sometimes grants a monopoly because doing so is viewed not only to be in the public interest, but also to encourage it with price incentives. However, monopolies fail to meet their resource allocation efficiently, producing less than the socially desirable quantities of output and charging prices above marginal cost.
A monopoly is a company that is the sole provider of a product or service. When there is a monopoly on a product, it means that there is not viable substitutes or competitors for the product or service that the company provides, and barriers that keep other companies from entering the market. Because the monopoly is the only company providing a product, they control price, supply, and other significant details of a product. Monopolies that are seen in a negative light are raising the price of products to higher than what they are worth and consequently being unfair towards their consumers by giving them a bad deal on a product (Cox). Of course, not all monopolies are bad for consumers.
Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
When the word monopoly is spoken most immediately think of the board game made by Parker Brothers in which each player attempts to purchase all of the property and utilities that are available on the board and drive other players into bankruptcy. Clearly the association between the board game and the definition of the term are literal. The term monopoly is defined as "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices" (Dictionary.com, 2008). Monopolies were quite common in the early days when businesses had no guidelines whatsoever. When the U.S. Supreme Court stepped into break up the Standard Oil business in the late 1800’s and enacted the Sherman Antitrust Act of 1890 (Wikipedia 2001), it set forth precedent for many cases to be brought up against it for years to come.
Competitive advantage is the advantage for the competitors and gained by the offerings from the consumers that have the greater value either by the low prices of the products and by providing the benefits and services to the consumers that denotes the high price. It is a set of the innovative and different features of the company and the products and services sale to the consumers so that company can achieve the targets what they have decided and it is the betterment for the enterprise in the competitive market (Porter, 2011). There are three determinants which can be used in the competitive advantage that what the company produce for their consumers, their target market that what they have to achieved and the competition from the other entity
Any oligopoly form of Market is where there is large number of buyer but few sellers present. They are selling a homogeneous or unique product. There are barriers to entry and exit in such type of a market form. Also, since barriers to entry are high, firm can earn super normal profit in the long run.
A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.
There are four different categories into which economists classify industries. These categories are perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these four categories has its own unique characteristics. Perfect competition has an unlimited number of firms, while a monopoly has one single firm, and an oligopoly consists of a small number of interdependent firms. The demand curve of an oligopoly depends on how firms choose to deal with their interdependence with the other firms in the industry. A firm within an oligopoly market can choose to cooperate with other firms in the industry, which is illegal, or the firm can choose to compete against the other firms. An oligopoly produces either differentiated products or homogenous products. In an oligopolistic market, entry barriers, which prohibit new firms from entering the industry, are present. Examples of entry barriers include patents, brand loyalty and trademarks. Long-run economic profits are possible for an oligopoly, and non-price competition is a significant way to compete with other firms in the same market. Most of the non-price competition in an oligopoly comes from product differentiation. The cereal manufacturing industry is an oligopolistic market because it exhibits many of these traits.
Well the bottom line is that a monopoly is firm that sells almost all the goods or services in a select market. Therefore, without regulations, a company would be able to manipulate the price of their products, because of a lack of competition (Principle of Microeconomics, 2016). Furthermore, if a single company controls the entire market, then there are numerous barriers to entry that discourage competition from entering into it. To truly understand the hold a monopoly firm has on the market; compare the demand curves between a Perfect Competitor and Monopolist firm in Figure
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
An oligopolistic market has a small number of sellers dominating market share and therefore barriers to entry are high. These sellers are highly competitive and do not act independently of each other. Access to information is limited so sellers can only speculate of their competitor’s actions. Sellers will take advantage of competitor’s price changes in order to increase market share.
Perfect and monopolistic competition markets both share elasticity of demand in the long run. In both markets the consumer is aware of the price, if the price was to increase the demand for the product would decrease resulting in suppliers being unable to make a profit in the long run. Lastly, both markets are composed of firms seeking to maximise their profits. Profit maximization occurs when a firm produces goods to a high level so that the marginal cost of the production equates its marginal
We can define competitive advantage as simply what a given company excels best at. This could be the distinguishing factor as to why consumers purchase from your company and not the competition. This could also be understood from the perspective of quality that a business can create for the consumer.
Competitive strategy is the approach that an organisation takes in order to gain advantage over its competitors. According to Porter, there are two major sources of competitive advantages: costs and differentiation. Cost-based competitive advantage involves reducing production costs so that an organisation can earn higher profit margin or offer products at lower price compared to competitors. Differentiation-based competitive advantage involves offering unique properties that are not offered by competitors’ products. Differentiation allows an organisation to charge a premium for their products because they offer additional benefits to buyers.