Spectrum of competition

    Cards (37)

    • Monopoly
      Market structure with a sole seller, high barriers to entry, and price maker
    • Monopoly Power
      Market dominance with more than 25% market share, leading to influence
    • Profit Maximisation
      Objective of monopolies to maximize profits in short and long run
    • Price Discrimination
      Charging different prices to different customers for the same product
    • Barriers to Entry
      Factors hindering new firms from entering a market, maintaining monopoly power
    • Economies of Scale
      Cost advantages as firms grow larger, discouraging new entrants
    • Limit Pricing
      Setting prices below new entrants' production costs to deter entry
    • Sunk Costs
      Unrecoverable costs like advertising deterring new firms from entering
    • Brand Loyalty
      Consumer loyalty to a brand, making it hard for new firms to compete
    • Set-up Costs

      Expensive initial costs of establishing a firm, discouraging new entrants
    • Advertising
      Can increase consumer loyalty and create barriers to entry
    • Product Differentiation
      Distinguishing a product through quality, pricing, and branding
    • High barriers to entry and exit
      Obstacles that make it difficult for new firms to enter or leave the market, reducing competition
    • High concentration ratio

      Scenario where a few firms dominate the market, leading to reduced competitiveness
    • Interdependence of firms
      Mutual reliance among firms where one's actions impact another's behavior in an oligopoly
    • Product differentiation
      Strategy where firms distinguish their products through branding, influencing market competitiveness
    • Imperfect competition
      Market scenario where firms are profit maximizers in the short run, selling non-homogeneous products with close substitutes
    • Cross-price elasticity of demand (XED)

      Measure of how the quantity demanded of one good changes in response to a change in the price of another, high in markets with product differentiation
    • Monopolistically competitive market

      Market structure with many small buyers and sellers, weak market power, non-price competition, and imperfect information
    • Price setting power
      Ability of firms to increase prices without losing all customers due to a downward sloping demand curve
    • Imperfect information
      Situation where buyers and sellers lack complete knowledge about market conditions in monopolistically competitive markets
    • Perfect competition
      Market with many buyers and sellers, price takers, and perfect knowledge
    • Price determination
      Price set by demand and supply interaction in a competitive market
    • Supernormal profits
      when a firms total sales revenue exceed the total costs of production
    • Allocative efficiency
      Achieved when price equals marginal cost (P = MC)
    • Dynamic efficiency
      Long-run efficiency but limited due to lack of supernormal profits
    • Cost plus pricing
      Setting prices based on unit cost to ensure cost coverage
    • Price skimming

      Setting high prices initially for new products with little competition
    • Penetration pricing

      Setting low initial prices to attract customers and gain loyalty
    • Predatory pricing
      Setting low prices to drive out competitors, then raising prices
    • Psychological pricing

      Using emotional reactions to price, e.g., pricing at 99p instead of £1
    • Unique Selling Points
      Factors influencing premium pricing for unique products
    • Price elasticity of demand
      Determines pricing based on responsiveness to price changes
    • Product life cycle
      Different pricing strategies based on product stage (launch, growth, decline)
    • Product differentiation
      Distinguishing products through branding, packaging, and advertising
    • Non-price competition
      Competing through factors other than price, like branding and advertising
    • Distribution methods
      Influencing demand elasticity by controlling product distribution