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  • Monopoly Barriers

    Enviado por

    Mashur M Alam
    46 visualizações6 páginas
    Barriers to entry are designed to block potential entrants from entering a market profitably existing firms are known as incumbents new firms threaten the market share and monopoly rents of existing businesses.

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    Barriers to entry are designed to block potential entrants from entering a market profitably existing firms are known as incumbents new firms threaten the market share and monopoly rents of existing businesses.

    Direitos autorais:

    Attribution Non-Commercial (BY-NC)
    Baixe no formato PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    46 visualizações6 páginas

    Monopoly Barriers

    Enviado por

    Mashur M Alam
    Barriers to entry are designed to block potential entrants from entering a market profitably existing firms are known as incumbents new firms threaten the market share and monopoly rents of existing businesses.

    Direitos autorais:

    Attribution Non-Commercial (BY-NC)
    Baixe no formato PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    de 6

    23/10/2010

    MonopolyandBarrierstoEntry

    A2MicroEconomics tutor2uNovember2010

    LongRun:BarrierstoEntry
    Barrierstoentryaredesignedtoblockpotentialentrants fromenteringamarketprofitably from entering a market profitably Existingfirmsareknownasincumbents Newfirmsthreatenthemarketshareandmonopolyrentsof existingbusinesses Barrierstoentryseektoprotectthemonopolypowerof existingfirmsandthereforemaintainsupernormal(or abnormal) profits in the long run abnormal)profitsinthelongrun Barrierstoentrymakeamarketlesscontestable i.e.they affectmarketstructureinthelongrun

    23/10/2010

    TypesofEntryBarrier(1)
    (1)Structuralbarriers(InnocentBarriers) duetodifferences inproductioncostsandbeinginthemarketforsometime Economiesofscale(consideranaturalmonopoly) Verticalintegration(backwardsandforwards) Controlofessentialtechnologies/commodities Expertiseandreputationoftheincumbent Brandloyalty andbrandproliferation Inherent suspicion among consumers about new ideas Inherentsuspicionamongconsumersaboutnewideas (2)Strategicbarriers Predatorypricing/limitpricing Marketing/productdifferentiation

    TypesofEntryBarrier(2)
    (3)Statutory(legal)barriers entrybarriersgivenforceof law law Licences(e.g.Professionalqualifications,bankinglicences, licencestosellalcohol,runanightclubetc) Patents(e.g.Inthepharmaceuticalindustry) CopyrightsandTrademarks Publicfranchises Tariffs,quotasandothertraderestrictionsaffecting importsofgoodsandservices

    23/10/2010

    Patents
    Patents Offerslegalprotectionof propertyrights property rights Generallyvalidfor1220years Givetheowneranexclusive righttopreventothersfrom usingpatentedproducts, inventions,orprocesses Protectionofintellectual property. Patentlicencescanbesoldto otherproducersandthen crosslicenced Designedtoencourage innovation andinvention

    23/10/2010

    IntegrationandPricingTactics
    VerticalIntegration Controloversupplychainand pp y distribution LimitPricing andPredatoryPricing Limitpricinginvolveslowering pricestoalevelthatwouldforce newentrantstooperateataloss (price<averagecost) Sacrificingsomeshortterm g profitsbuttorestoreand maintainsupernormalprofitsin thelongrun Predatorypricing illegal

    CostAdvantagesand Marketing/Branding
    Absolutecostadvantages E.g.economiesofscale Lowerunitcostsforan establishedbusiness AdvertisingandMarketing Establishingbrandedproducts Makesdemandlesselastic Lowerscrosspriceelasticity BrandProliferation Brand proliferation disguises Brandproliferationdisguises fromconsumerstheactual concentrationinmarketssuch asdetergents,confectionery andhouseholdgoods.
    AC SAC1

    SAC2

    SAC3

    LRAC

    Output

    23/10/2010

    BarrierstoExit
    Therearecostsassociatedwithexitinganindustry (1) Assetwriteoffs (1)Assetwriteoffs E.G.plantandmachinery,stocks (2)Closurecosts Redundancycosts,contractswithsuppliers Penaltycostsfromendingleasingarrangements (3)Lostreputation ( ) p Lostgoodwill,damagetothebrand Sunkcostsarecostsincurredwhenenteringamarketthatare irrecoverable shouldafirmdecidetoleave

    Reducingentrybarriers
    Technologicalchangeinmarkets
    Impactofdisruptivetechnologies

    Removalofstatutorybarriers e.g. theliberalisationofmarkets


    Utilities
    Postalservices Electricity Gas

    Banking/Finance g/ Globalisationofmarkets
    Emergenceofforeigncompetition

    23/10/2010

    Tutor2u
    Keepuptodatewitheconomics, resources,quizzesand resources quizzes and worksheetsforyoureconomics course.

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