economics
- Created by: katier1234
- Created on: 17-11-19 14:14
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- Monopoly and Monopoly Power- 3
- The potential economic benefits monopoly- evaluation
- Market power can bring advantages to both the firm and the consumers themselves
- Research and development spending- Huge co-operations enjoying big profits are well placed to fund capital investment and research and development projects
- This is positive spill-over effects of research can be seen in more innovation. this can be industries such as telecommunications and pharmaceuticals
- The gains are:
- Dynamic efficiency- which can lead to better products with the latest designs and technology at reasonable prices
- Social benefits- if they for example pharmaceutical companies develop a new drug to fight disease
- The gains are:
- This is positive spill-over effects of research can be seen in more innovation. this can be industries such as telecommunications and pharmaceuticals
- Exploitation of economies of scale
- because monopoly producers often supply on a large scale , they may achieve economies of scale- leading to a fall in average costs and therefore falling prices for consumers
- International competitiveness
- The British economy needs multinational companies operating on a large scale enough to compete in global markets. Monopolists who invest heavily in R&D may well produce products that are in high demand globally which boosts uk exports and economic growth- steel
- Research and development spending- Huge co-operations enjoying big profits are well placed to fund capital investment and research and development projects
- Market power can bring advantages to both the firm and the consumers themselves
- Government intervention in markets - an introduction to UK competition policy
- Competition policy involves the regulation of markets to protect and improve consumer welfare:
- The competition and market authority- its main concern is to investigate mergers and takeovers to examine if these mergers will have a negative effect on competition
- The office of fair trading- Reports on allegations of anti-competitiveness practices including claims of collusion 'price-fixing' behaviour
- The European competition authority - examines anti- competitiveness behaviour, mergers and takeovers to distort competition
- Utility regulators such as OFGEM, OFCOM,OFWAT monitor the industries that were privatised. The regulators have used the power to introduce and review price capping and they also have sought tp bring fresh competition into markets- pricing is fair
- Competition policy involves the regulation of markets to protect and improve consumer welfare:
- Real World forms of competition
- Price competition
- special offer pricing- where firms offer temporary special offers e.g supermarkets
- Limit pricing- this is when firms sacrifice short run profits by reducing the price of a good to just above average cost to deter the entry of new firms into the market as new firms wont be able to sell at such a low price
- Predatory pricing- this removes competing firms from a market as opposed to deterring new entrants. established firms drop their prices below thier costs to force out comptiton from the market who cant compete with such a low price
- Non price competition- offering different services keeps out competition
- Advertising
- Product differentiation
- Marketing competiton
- Branding image
- Packaging competiton
- The use of fashion, style and design
- After sales service
- Price competition
- The potential economic benefits monopoly- evaluation
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