Predatory pricing is an anticompetitive strategy that indents to drive competitors out of the market and gain monopolistic profits. The logic of predatory pricing is very simple. The predatory firm first lowers its price, to an extent which the revenue of the product does not cover the costs. The competitors must then lower their prices below average cost, thereby losing money on each unit sold. If they do not cut their prices, they will lose competitiveness; if they do cut their prices, they will eventually go bankrupt.
These products hence cannot substitute each other. In the monopolistic competition, the firm ignores their prices impact on the other firm's product prices while taking the charged price by the rivals just like it's given. In a coercive government, a monopolistic competition falls under a government granted monopoly. In this case, the firm maintains spare capacity. Examples of monopolistic competition include clothing's, shoes, cereals and restaurants and all the service industries in the different
The two aspects of the prohibition are: that the enterprise or group is in a dominating position and that it abuses that dominance. Section 4(2) (a) to (e) deals with the conducts which will be termed as abuse of dominant position and will attract the provision of Competition Act 2002. Section 4 (2) (a)- directly or indirectly, imposes unfair or discriminatory— (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. Discrimination means differentiation relating to price, terms of sale, or the quality or quantity of what they supplied, and may extend to refusal to sell. The imposition of discriminatory, unfair conditions by the dominant enterprise, to any category of user, or any other enterprise having contractual relationship with the dominant enterprise, is abusive.
A monopoly is the sole seller of its product so it is in “a position of economic strength” because there is no competition, the monopoly can “behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers” without losing market share. The definition represents an oligopoly to an extent because oligopolies do have competition in their market with other firms producing similar or identical products. Therefore they cannot act independently of its competitors. However, oligopolies are price makers and are in a position of economic strength. The definition is more fitting to oligopolies that collude and form cartels because they become more like a monopoly.
A monopoly is a market structure, where there is only one supplier or entity of a good or service in the market. In reality, a firm is categorised in UK as a monopoly when it has at least 25% market share (Economics Help, 2012). Monopolies can emerged from “exclusive ownership of a scarce resource, granted monopoly status by the government, exclusive patents or copyright to sell a product or protect their intellectual property” (Economics online, anon) or mergers and acquisitions to sell a good or service. One of the key characteristics for a monopoly is that the monopoly firm is a price maker because there is lack of competition. This position allows the firm to obtain abnormal profit in the long run when it operates at the profit maximising point, where marginal cost equals marginal revenue.
In monopolistic competition, the industry consists of many firms competing each other, and each firm practices product differentiation with a product that is slightly different from the products of competing firms. Firms are free to enter and exit the industry. The product differentiation enables firms to compete on product quality, price and marketing. To stay in the industry for a considerable period, the firm must maximize its profit. Because of product differentiation, a firm in monopolistic competition faces a downward-sloping demand curve.
State of limited competition, in which a market is shared by a small number of producers or sellers. Meaning the market only has a handful of companies functioning in the same structure. The substitution of a product for another product or one vehicle for another it is completely possible in an Oligopoly market only from one of the few companies in the Oligopoly market structure. In the United States these companies would include Ford, GM, and Chrysler (Grunert n.d.). It is extremely difficult for any new Company wanting to enter into an Oligopoly market structure.
A monopoly is characterized when a single supplier in the entire market own a specific product, so that from that specific product, or products, they own the entire market share. A monopoly is also defined when a company own 25% of that market, meaning they have a huge part of the market share. There are many reasons why a monopoly may form for a specific product. One of the reasons is when a company has the ownership of a specific requirement for one specific product, and example is how Apple owns the IO Software. Microsoft owning the Windows software, so in that are they are monopolizing that market, with those specific software.
This can be the case when there is a dominant supplier in a market segment who abuses its power. These companies then have a so-called market dominance in a monopoly. The definition of a monopoly runs as follows: if a firm, or a group of firms, substantially or completely controls a product or service in a given geographic area, they have a market dominance in a monopolistic market. (Competition Bureau, 5th November