Monopoly and monopolistic competition - Commercial law

Monopoly and monopolistic competition

With a monopoly on the market, one seller deals with many buyers and is a monopolist. It is beyond competition and can determine the chain and the number of goods sold. The buyer remains the decision: how many products at a given price he can buy.

However, the monopolist can not arbitrarily raise the price, because with the price increase demand decreases, and if the demand is elastic (there are commodity substitutes that the buyer can purchase at a lower price), then the total revenue also decreases. Therefore the monopolist, if he wants to sell more goods, should reduce the price.

Monopolistic (imperfect) competition occurs quite often: a polypole in an imperfect market where many sellers and many buyers act independently. In this market, enterprises strive to expand their preferences by expanding the range of homogeneous products, individualizing their products through trademarks, names and advertising campaigns. By these measures they create a certain monopoly position in a limited scope.

Let's say, for example, three companies are represented on the market (three subsets of products 52, 53), each of which satisfies the needs of three groups of consumers (subsets 25y2 $ <- market niches of these enterprises). The mappings of subsets of products on the set of requirements will in general be intersecting (Figure 5.3, b). In this case, the set of needs is divided into eight subsets (market segments):

2 - a segment in which the needs can be met by the products of each of the three enterprises. If all three enterprises are represented in this market segment, we can speak about the absence (or limitation) of the monopoly of commodity producers (in this segment). Leaving an enterprise from the market in question will only temporarily reduce the degree of satisfaction of demand

The relationship between the set of needs (X) and the set of products (S) in the commodity market: ">

Fig. 5.3. The relationship between the set of needs (X) and the set of products (S) in the product market:

a - there is a monopoly; b - there is an oligopoly

sa, as other businesses will increase their market share. Obviously, this segment includes especially important needs, priority is given to satisfaction, and all three companies compete for their shares in this segment.

22, 23, 2 ^ are segments in which the needs are met by two of the three enterprises. The monopoly position of enterprises-producers is limited here to a lesser extent than in the segment 2. If one of the companies withdraws from these segments of the market, the demand for the goods will be satisfied only by one enterprise that will take a monopoly position. It can be assumed that the segments under consideration include important needs, the priority for satisfying them is lower than in the segment 2, and only two enterprises will compete for their shares in these segments. The intensity of competition in these segments is lower than in segment Z1.

2 $, 2 & amp; 2 -1 - segments in which the needs are met by the product of only one of the three enterprises. The monopoly position of enterprises-producers in these segments of the market is not limited. When the enterprise leaves the market, the demand remains unsatisfied (a free niche is formed). Apparently, these segments of the market are represented by the needs, satisfaction of which is beneficial only for the given enterprise, and the other two enterprises are not interested in this niche for one reason or another. In these segments, enterprises behave like monopolists.

2% is a subset of the needs that products of these enterprises are not met. This segment is a free niche in which there is no supply of goods. Perhaps these are needs whose satisfaction can be neglected, or the needs of low-income social groups, the satisfaction of which does not bring profit to enterprises. It is also possible that in this niche of the market there are needs of wealthy people who make high demands on the quality parameters of products that this group of competing enterprises can not provide.

Thus, on the same market in different segments of it, there are different intensity of competition and different reliability of satisfying demand. With oligopoly, the higher the intensity of competition, the higher the reliability of satisfying demand.

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