Monopoly Revolution Game

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Price discrimination: A monopolist can change the price or quantity of the product. They sell higher quantities at a lower price in a very elastic market, and sell lower quantities at a higher price in a less elastic market. In addition to barriers to entry and competition, barriers to exit may be a source of market power. Barriers to exit are market conditions that make it difficult or expensive for a company to end its involvement with a market. High liquidation costs are a primary barrier to exiting. [15] Market exit and shutdown are sometimes separate events. The decision whether to shut down or operate is not affected by exit barriers. [ citation needed] A company will shut down if price falls below minimum average variable costs.

Economic barriers: Economic barriers include economies of scale, capital requirements, cost advantages and technological superiority. [8]No substitute goods: A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for that good relatively inelastic, enabling monopolies to extract positive profits. Product differentiation: There is no product differentiation in a perfectly competitive market. Every product is perfectly homogeneous and a perfect substitute for any other. With a monopoly, there is great to absolute product differentiation in the sense that there is no available substitute for a monopolized good. The monopolist is the sole supplier of the good in question. [19] A customer either buys from the monopolizing entity on its terms or does without. Find sources: "Monopoly"– news · newspapers · books · scholar · JSTOR ( January 2022) ( Learn how and when to remove this template message)

This section needs additional citations for verification. Please help improve this article by adding citations to reliable sourcesin this section. Unsourced material may be challenged and removed. Network externalities: The use of a product by a person can affect the value of that product to other people. This is the network effect. There is a direct relationship between the proportion of people using a product and the demand for that product. In other words, the more people who are using a product, the greater the probability that another individual will start to use the product. This reflects fads, fashion trends, [13] social networks etc. It also can play a crucial role in the development or acquisition of market power. The most famous current example is the market dominance of the Microsoft office suite and operating system in personal computers. [14]

Technological superiority: A monopoly may be better able to acquire, integrate and use the best possible technology in producing its goods while entrants either do not have the expertise or are unable to meet the large fixed costs (see above) needed for the most efficient technology. [9] Thus one large company can often produce goods cheaper than several small companies. [12] Manipulation: A company wanting to monopolise a market may engage in various types of deliberate action to exclude competitors or eliminate competition. Such actions include collusion, lobbying governmental authorities, and force (see anti-competitive practices). The boundaries of what constitutes a market and what does not are relevant distinctions to make in economic analysis. In a general equilibrium context, a good is a specific concept including geographical and time-related characteristics. Most studies of market structure relax a little their definition of a good, allowing for more flexibility in the identification of substitute goods. The number of companies in the market: If the number of firms in the market increases, the value of firms remaining and entering the market will decrease, leading to a high probability of exit and a reduced likelihood of entry.

Capital requirements: Production processes that require large investments of capital, perhaps in the form of large research and development costs or substantial sunk costs, limit the number of companies in an industry: [11] this is an example of economies of scale. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. First-mover advantage: In some industries such as electronics, the pace of product innovation is so rapid that the existing firms will be working on the next generation of products whilst launching the current ranges. New entrants are destined to fail unless they have original ideas or can exploit a new market segment.

Profit maximization: A PC company maximizes profits by producing such that price equals marginal costs. A monopoly maximises profits by producing where marginal revenue equals marginal costs. [23] The rules are not equivalent. The demand curve for a PC company is perfectly elastic – flat. The demand curve is identical to the average revenue curve and the price line. Since the average revenue curve is constant the marginal revenue curve is also constant and equals the demand curve, Average revenue is the same as price ( AR = TR Q = P ⋅ Q Q = P {\displaystyle {\text{AR}}={\frac {\text{TR}}{Q}}=P\cdot {\frac {Q}{Q}}=P} ). Thus the price line is also identical to the demand curve. In sum, D = AR = MR = P {\displaystyle {\text{D}}={\text{AR}}={\text{MR}}=P} . Advertising: Advertising and brand names with a high degree of consumer loyalty may prove a difficult obstacle to overcome. P-Max quantity, price and profit: If a monopolist obtains control of a formerly perfectly competitive industry, the monopolist would increase prices, reduce production, incur deadweight loss, and realise positive economic profits. [24] Elasticity of demand: The price elasticity of demand is the percentage change of demand caused by a one percent change of relative price. A successful monopoly would have a relatively inelastic demand curve. A low coefficient of elasticity is indicative of effective barriers to entry. A PC company has a perfectly elastic demand curve. The coefficient of elasticity for a perfectly competitive demand curve is infinite. [20] Barriers to entry: Competition within the market will determine the firm's future profits, and future profits will determine the entry and exit barriers to the market. Estimating entry, exit and profits are decided by three factors: the intensity of competition in short-term prices, the magnitude of sunk costs of entry faced by potential entrants, and the magnitude of fixed costs faced by incumbents. [5]