Market Dominance In A Monopolistic Market

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1. Introduction Free competition is an important part of a market economy. The ideal market would be a perfect competitive market, in which the price follows from the equilibrium of the supply and demand curve and in which there will always be free competition. But in some markets there is no free competition and there are no fair prices. 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…show more content…
Obstacles to entry are called barriers to entry. They can be divided into natural and artificial barriers. Natural entry barriers include: ownership or control of a key scarce resource, high set-up costs (fixed costs) or high research and development costs. Artificial barriers include: predatory pricing (deliberately lower price), limit pricing (selling at a price below average total costs of potential entrants), predatory acquisition (taking over a potential rival by purchasing shares), vertical integration (as manufacturer having its own retail stores), advertising and patents (Economics Online). These barriers to entry hinder the free competition in this market. The EC wants to limit these barriers, but the natural barriers can not be effaced. Therefore, there will always be barriers to entry a market. The EC discovered that Gazprom creates artificial barriers to entry the gas market. Gazprom for instance has control over major gas pipelines to Bulgaria and Poland. They are able to prevent new gas suppliers from entering the market with the control over these

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