| Term | Definition |
|---|
| Anti-competitive practices are business practices that prevent and/or reduce competition in a market For e.g., Dumping, price fixing, exclusive dealing, entry barriers etc. Under perfect competition, no buyer or seller has the power to significantly affect the prices at which goods are being exchanged. | what is anti competitive behaviour |
| Multiplicity of small participants Free and immediate entry or exit for all Perfect knowledge of prices, quantities, and quality for all No distinction between products | conditions of free market 1 |
| Complete costs and benefits of products reflected in price Utility maximization: Everyone tries to get as much as possible for as little as possible No external parties, such as government restrict price, quantity, or quality | conditions of free market 2 |
| Enforceable property rights A system of contracts and its enforcement An underlying system of production The first two are the proper roles of government in a free market system | free market needs |
| Free markets establish capitalist justice for all The amount the buyers want to buy exactly equals the amount the sellers want to sell and the price the buyers are willing to pay equals the price sellers are willing to take Since markets converge on the equilibrium point, buyers and sellers receive on average what they contribute What happens if the price is too high or too low? | morality of free market justice |
| Free markets maximize utility for all Shift resources to where demand is high and away from where demand is low Minimize costs by minimizing resources used, encourage investment in new technology Distribute commodities efficiently among consumers | morality of free market utilitarian |
| Establishes negative rights Buyers and sellers are free to enter and exit the market All exchanges are completely voluntary No buyer or seller is dominant, so no one has to accept the terms or do without the good | morality of free market rights |
| No justice for people outside the market, so no justice based on needs No establishment of positive rights No care for others No bar on accumulation of excessive wealth Does maximization of individual utility lead to utilization of society | criticism of free market morality |
| The highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself. In other words, individuals are free to work, produce, consume, and invest in any way they please, and that freedom is both protected by the state and unconstrained by the state | economic freedom |
| Violates capitalist justice Monopolist can charge whatever price they want Inefficiency Because of high prices, there is less demand and less is produced Excess profits of producer are not used to produce goods that consumers want | morality of monopoly 1 |
| No respect for negative rights Sellers are not free to enter market Monopoly firm can force customers to buy products they do not want Monopoly firm has absolute power to determine prices and quantities in the market | morality of monopoly 2 |
| Regulations Anti-trust laws Limited patent life Lowering of global trade barriers Pressure from world bodies, media etc | pressure on monopoly |
| Price Fixing International airline tickets Manipulation of Supply OPEC Exclusive Dealing Arrangements Gas stations that deal with only one petroleum supplier Tying Arrangements Microsoft ties together Windows, Internet Explorer, Office, Media Player | problems with olligpoly1 |
| Retail Price Maintenance Agreements Manufacturer sells to retailer on condition that they agree to a certain price, price floor or/and price ceiling - Retail industry Price Discrimination Legal as long as based on differences in volume bought or production cost differences – Student fares | problems with oligopoly 2 |
| DO NOTHING APPROACH! Power of oligopolies is not as large as it appears Competition between industries with substitutable products Other countervailing forces, like other corporate groups, unions, government In face of global competition, bigger is better! | oligopoly, monopoly and public policy approahces1 |
| If an industry has few competitors, there is likely to be some control over prices. Concentration results in recognized interdependence among companies Concentration is due mostly to mergers. A high degree of concentration is unnecessary. | antitrust view 1 |
| A middle ground between the other two Do not wish to lose the economies of scale offered by large corporations, but also wish to ensure that large firms do not harm the consumers Setting up regulatory agencies and legislation to control the activities of large corporations In extreme cases, government takes operation of firms – nationalization | regulation view |
| Concentration is aggravated by product differentiation and advertising. Market entry is difficult and so does not reduce excess profits There is oligopolistic coordination by signaling through press releases or other means. So, break large corporations into smaller units resulting in higher competition. This will lead to lower prices for consumers, more innovation, less explicit and tacit collusion | antitrust view 2 |
| Enforceable property rights A system of contracts and its enforcement An underlying system of production The first two are the proper roles of government in a free market system | free market also needs |
| Only one seller, with 100% market share Barriers to entry (Eg, patents, high set up costs) Classic Examples: Standard Oil, AT&T Modern Examples: BC Hydro, Terasen Gas, Drug patents Microsoft? | what is monopoly |
| One Seller High barriers to entry Prices set above the equilibrium point Quantity supplied is below equilibrium point Can extract monopoly profit | conditions of monopoly |
| Patents Alcoa (Patents till 1909) Pharmaceuticals Mergers Standard Oil Government support BC Hydro, Telus, Teresan Gas | causes of monopoly |
| Few significant sellers Difficulty of entering the market Often formed by mergers of smaller firms Pharmaceuticals, aircraft, automobiles, soft drinks | conditions of oligopoly |
| Mergers Patents Government support High start up costs Long term contracts | causes of oligopoly |
Combine with other sets
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