Power exclusive, or franchise to sell a commodity, and the power zone, and the right, or privilege of dealing in some article, or trading in some markets, the only thing the movement of anything, but it was obtained; appropriate, the owner of a patent is given Article monopoly to sell it for a limited time and commercial companies that were chartered in some cases, the monopoly of trade with the remote areas; a combination of traders may get a monopoly for a particular product.
Price and output under a pure monopoly :
Can take the pure monopoly in the market demand curve and your demand. The company is a manufacturer price but can not charge a monopoly price that consumers in the market will bear. In this sense, the price elasticity of the demand curve is a constraint on monopoly pricing power.
The effect of a rise in costs on monopoly price and profits:
Rise in price from P1 to P2 in the monopolist help to offset some of the increase in costs, but the net effect there is still a drop in gross profits and the contraction in production. The extent to which work with monopoly power can pass on the rise in costs depends in part on the price elasticity of demand - pricing power is greatest when demand is price inelastic.
Barriers to entry – protecting monopoly power in the long run:
v Designed barriers to entry for potential entrants to block access to market profitably. It seeks to protect the power of existing companies and to maintain the extraordinary profits / increase producer surplus. These barriers have the effect of making the market less challenging - and it is important because it determines the extent to which established firms can price higher than marginal cost and average over the long term.
Definition of the 1982 Nobel Prize winner George Stigler economy entry barrier as "the cost of producing a thousand of which must be borne by the company that is seeking to enter the industry but is not borne by firms already in the industry."
Another economist, George Payne, the definition of entry barriers slightly different way: "To what extent can established companies to raise their selling prices above the average of the minimum of the cost of production without causing potential entrants to enter the industry."
This confirms that this disparity in costs that often exist between the company's current (ie, dealing with the power market is already on the market) and the potential entrant. If firms were able to exploit the existing economies of scale and thus placed on the cost advantage, potential entrants, can use this feature to reduce prices if and when new suppliers enter the market. This involves the decision to stay away from short-term objectives to maximize profit - but is designed to inflict losses on new companies and therefore the protection of a dominant position in the market over the long term. Monopolist could go back and back to maximize the profit once the rejection of the new arrivals!
Different types of entry barriers exist:
Definition of the 1982 Nobel Prize winner George Stigler economy entry barrier as "the cost of producing a thousand of which must be borne by the company that is seeking to enter the industry but is not borne by firms already in the industry."
Another economist, George Payne, the definition of entry barriers slightly different way: "To what extent can established companies to raise their selling prices above the average of the minimum of the cost of production without causing potential entrants to enter the industry."
This confirms that this disparity in costs that often exist between the company's current (ie, dealing with the power market is already on the market) and the potential entrant. If firms were able to exploit the existing economies of scale and thus placed on the cost advantage, potential entrants, can use this feature to reduce prices if and when new suppliers enter the market. This involves the decision to stay away from short-term objectives to maximize profit - but is designed to inflict losses on new companies and therefore the protection of a dominant position in the market over the long term. Monopolist could go back and back to maximize the profit once the rejection of the new arrivals!
Different types of entry barriers exist:
v Structural barriers (barriers to entry innocent) - arising from differences in production costs
v Strategic barriers (see notes below on strategic entry deterrence)
v Legal barriers - barriers to enter a certain power of the law (such as patent protection of privileges such as the National Lottery or television and radio broadcast licenses)
Barriers exist when entering the higher costs for incoming companies to the list. This is shown in the following graph:
Barriers exist when entering the higher costs for incoming companies to the list. This is shown in the following graph:
v
In the graph we assume that the former monopolist and the current has achieved economies of scale so that the LRAC and LRMC forless than that of potential companies. If he maintains the monopoly profit-maximizing price of P1, the participant can make a profit in the market since the economic costs less than the prevailing price. Any price below P will make the potential loss of the companies - and can enter the besieged.
Barriers to Exit - Sunk Costs:
v Can not recover the fixed costs if the business decides to leave the industry. Examples include:
v Capital inputs that are specific to this industry and that little or no resale value.
v Money spent on advertising and marketing projects, research and development that can not be carried over to another market or industry.
When sunk costs are high, a market becomes less contestable.High fixed costs as a barrier to entry for new companies (it runs the risk of heavy losses in the event decided to leave the market). On the other hand, markets such as fast food restaurants, sandwich bars, hairdressing salons and antiques and local markets and low sunk costs of the barriers to exit are low.
Enter the market and the repeated failure of companies operating in the service of many industries and retail trade is evidence of significant entry barriers.
When sunk costs are high, a market becomes less contestable.High fixed costs as a barrier to entry for new companies (it runs the risk of heavy losses in the event decided to leave the market). On the other hand, markets such as fast food restaurants, sandwich bars, hairdressing salons and antiques and local markets and low sunk costs of the barriers to exit are low.
Enter the market and the repeated failure of companies operating in the service of many industries and retail trade is evidence of significant entry barriers.
Exit costs - Coca-Cola to withdraw Dasani from the market of the United Kingdom:
March 2004 was a bad month for the Coca-Cola - the world's largest manufacturer of soft drinks. Had to withdraw its troops from the bottled water Dasani retail shelves in the UK just two months after it launched because the product does not meet safety standards. This was a painful and costly blow to Coca-Cola because it attempts to diversify its economy away from traditional products in the fastest-growing market for bottled water. It shows the financial costs incurred when he had either to work or choose to withdraw the product from the market. Was required to withdraw the product because of the strict consumer safety regulation in Britain. Under UK law, and should take advantage of bottled water or do not contain more than 10 micograms per liter of bromate, a chemical that has the potential to increase the risk of cancer. The analysis revealed Coca-Cola levels in some samples of bottled water for up to 25 micrograms per liter.
This has had a Dasani bottles withdrew from the sale as soon as possible. There were more than 500,000 bottles to sell when the decision was taken. Coca-Cola left studying the effectiveness of the £ 2 million had already spent putting the product on the market - which is part of a promotional campaign a total value of 7000000 £ the budget was to make the launch of Dasani same kind of success in the United Kingdom has enjoyed in Europe.
Coca-Cola, which gets more than two thirds of its revenue from outside the United States now rely more heavily on sales of water and juices to counter slowing demand for soft drinks in North America. Dasani may remember the negative publicity makes it difficult for Coca-Cola to compete against the makers of bottled water such as Nestle in other parts of Europe as well.
Further reading:
BBC News: Coca-Cola recalls bottles of Dasani - see also bomb Coca-Cola's homepage (2004) and Capital Programme report Coca-Cola (2004)
This has had a Dasani bottles withdrew from the sale as soon as possible. There were more than 500,000 bottles to sell when the decision was taken. Coca-Cola left studying the effectiveness of the £ 2 million had already spent putting the product on the market - which is part of a promotional campaign a total value of 7000000 £ the budget was to make the launch of Dasani same kind of success in the United Kingdom has enjoyed in Europe.
Coca-Cola, which gets more than two thirds of its revenue from outside the United States now rely more heavily on sales of water and juices to counter slowing demand for soft drinks in North America. Dasani may remember the negative publicity makes it difficult for Coca-Cola to compete against the makers of bottled water such as Nestle in other parts of Europe as well.
Further reading:
BBC News: Coca-Cola recalls bottles of Dasani - see also bomb Coca-Cola's homepage (2004) and Capital Programme report Coca-Cola (2004)
Strategic Entry Deterrence:
v Deterrence strategy involves the entry of any move by the existing companies in order to strengthen their position against other companies from potential competitors. This may include:
v Hostile takeovers and acquisitions
v
Product differentiation through the spread of the brand (ie, investment in the development of new products and big spending on marketing and advertising)
Product differentiation through the spread of the brand (ie, investment in the development of new products and big spending on marketing and advertising)
v Expand the ability to reduce unit costs from the exploitation of economies of scale
v Predatory pricing: the current companies may offer price discounts to customers who select entrants low prices.
Strategy may be considered anti-competitive barriers by the British authorities and the European Union's competition - the Competition Commission in the European Union has been active in recent years in building cases against European companies operating in the field of anti-competitive practices including price-fixing cartels. However, we often witness entry of new suppliers to the markets and industries where one or more of the companies have a clear position of market power. Can occur in the entry of a variety of ways:
Strategy may be considered anti-competitive barriers by the British authorities and the European Union's competition - the Competition Commission in the European Union has been active in recent years in building cases against European companies operating in the field of anti-competitive practices including price-fixing cartels. However, we often witness entry of new suppliers to the markets and industries where one or more of the companies have a clear position of market power. Can occur in the entry of a variety of ways:
v The takeover from outside the industry (sometimes known as "the way a Trojan horse" to overcome any barriers to entry structure, which may be present within the industry)
v Widening the range of products from a company outside the specific market, but with the state of technology sufficient to challenge existing companies
v And the transfer of brand names from one sector of the economy to another (for example, to diversify exercised by each of the Easy Group and the Virgin in recent years)
v Increased competition from abroad - spurred by fluctuations in the exchange rate for the development of a competitive advantage by foreign companies
v Growing markets - if demand continues to increase, it may be expected to increase market prices, and through the price mechanism to work, and high prices propose an increase in potential profits for new entrants, even if the initial higher cost of production of existing companies
May be the substance of the existing companies to control the flow of new companies coming to the market rather than to engage in strategies aimed at preventing the entry of any new company altogether. R.s. Coca-Cola (2004) new firm outright. R.s. Coca-Cola (2004)
May be the substance of the existing companies to control the flow of new companies coming to the market rather than to engage in strategies aimed at preventing the entry of any new company altogether. R.s. Coca-Cola (2004) new firm outright. R.s. Coca-Cola (2004)
Barriers to Exit:
For many companies, there are also barriers to exit, increasing the intensity of competition in the industry because the existing companies have no choice but to "stay and fight" when market conditions have deteriorated. There are many costs associated with out of the industry.
v Asset write-offs - for example the expense associated with the removal of items from stock, and plant and machinery and goodwill for the brand
v Closing costs including the cost of repetition, and contracting with suppliers and the costs of emergency to end the death of the leasing arrangements for real estate
v Loss of business reputation and consumer friendly - can take the decision to leave the market seriously affect the goodwill between the former clients, not the least of those who bought products that are withdrawn, then the spare parts that make it difficult or impossible to obtain.
v Some might think that the reduction in the market and temporary and can be overcome when the economic cycle turns, commercial and conditions become more favorable
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