Key Economic Theories Of Price Fixing Economics Essay

Key Economic Theories Of Price Fixing Economics Essay 2A. Features of an oligopoly and key economic theories of price fixing : Introduction : This part of the coursework aims to identify the key features of oligopolistic competition in market and the economic theories related to price fixing. In monopoly one company controls the major market share while in oligopoly; market is controlled by more than one firm or a group of small firms. This analysis describes the features of oligopoly and kinked demand curve in oligopolistic situation. It also explains the pricing theories in context with game theory and Nash Equilibrium. Oligopoly : In oligopoly, large percentage of market is captured by leading firms, producing same product or services. Such firms agree to cooperate and act as single monopoly thus making a cartel to generate maximum profits. Key features of oligopoly are: Same product or service by the group of dominated firms. Branded product by each firm. Entry barriers. Interdependence among the firms. Non-price competition. Small firms may exist in oligopoly but the market is usually controlled by large players having more than half of the industry output. Each firm produces branded product, therefore creating high competition resulting in high marketing and advertising costs. Entry barriers such as government regulations, patents, setup cost and undivided resource ownership, restricts a new entrant to enter the oligopolistic market. Interdependence means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions (Begg Ward). Such an uncertainty in market can be resolved by the use of game theory which is applied by a firm taking account of the decisions made by the rival firm. Non-price competition among the oligopolistic firms, aim at increasing their market share significantly e.g. media advertising, promotional offers and discounts, use of technology, customer friendly services such as self scanning machines and customer loyalty benefits etc. Kinked demand curve theory According to Paul Sweezys assumptions, if an oligopolistic raises its price, the rivals are unlikely to follow the same suit because keeping the prices constant will increase their market share. Revenue of the firm that raised its price will fall by fairly large amount, making the demand curve relatively elastic. However if the firm reduces the prices, it is highly likely that the competitors will also reduce the prices. Source: Tutor2u Limited,2010 This non-collusive theory explains the stability once the price is set but fails to explain how the stable price is achieved. In oligopolistic situation; each company has an option either to start a price war with the rival or to cooperate. Game theory deals with the prediction of probable outcomes of the games of strategy in which rivals have incomplete information about others intensions e.g. Prisoners dilemma is a situation in which two suspects are interrogated in separate rooms, depicts an example of game theory. Each suspect has simple options either confesses and bears the consequences or denies and hopes the other has also done the same. To explain which strategy the firms will adopt can be explained by Nash equilibrium, in which each firm considers its rivals response before taking their own strategy.(Begg Ward,p.131) Equilibrium occurs when each player takes the best possible action for themselves given the action of the other player. Nash equilibrium is a situation in which none of the firms could improve pay-off, given the rivals strategies e.g. firm A would not be able to improve profits , given firm Bs strategy and vice versa. Each firm may indulge in high or low price strategies. If both firms collude to adopt high price strategy, both would yield above normal profits and if both adopt low price strategies, both would yield normal profits. Suppose in long run, each firm fails to trust the rival and indulge in low price strategy to increase its profits and the rival adheres to the high price than the rival may face heavy loss. Such a fear that the rival may adopt a damaging strategy exists within the firms and it is therefore in the interest of both the firms to adopt a low price strategy. Such a situation is called Maximin strategy where the player adopting the strategy yields maximum profits, assuming that the rival may inflict maximum damage. At times a group of oligopolists engage in an overt agreement to fix the prices and the level of production. Such an overt collusion, in order to act as a monopolist, is called collusive oligopoly and aims to earn maximum profits by restricting the production and increasing the prices. Price changes of one firm are sometimes matched by the other firm and the firm initiating the price change is called price leader; such collusion is called as tacit collusion. Rectangle abcd depicts the cartels profits. Cartels are likely to break in long run as the members are intended to cheat sometime or the other by increasing production. By producing more output than decided, the member can increase its share from cartels profit. If each member cheats than cartel ends up in earning monopoly profits and thereby leaving no reason for the firm to remain in the cartel. Conclusion Interdependence is the key feature of oligopolistic market. The outcome of any strategy by a firm is uncertain and the price competition may lead to price-war. Entry barriers help the dominant firms to maintain their control over the market. Formation of cartels may yield short term gains but are hazardous in long run. It is also observed that non-price competition may benefit oligopolists to increase market share and sustain in long term. 2B.Extent to which telecom sector in India is an oligopoly and price determination strategy Introduction Indian Telecommunication industry is the second largest and fastest telecom industry in the world with around 706.37 Million telephone (landline and mobile) subscribers and 670.60 Million mobile phone connections as of Aug2010.Dominance of few major players has made this sector perfect case of Oligopoly in India. Due to the presence of limited number of players, each player is aware of the rivals actions and therefore the decisions of one firm is affected by the action of the other firm. Service Provider wise Market Share as on 31-7-2010 Source: Telecom Regulatory Authority of India Concentration Ratio Players Market Share(%) Bharti (Airtel) 21.34 Reliance 17.37 Vodafone 17.08 Tata 11.47 Concentration Ratio 67.26 Table above shows that four firm concentration ratio is above 40% Barriers to entry in Telecom The high entry barriers in telecom sector as mentioned below turns the market oligopolistic in nature. High capital investment required by the new entrant for initial setup competition with well established operators Airtel, Vodafone, Reliance and Tata license fee on revenue sharing basis plus one time entry fee continuously emerging technology e.g. VOIP,3G lowest tariffs in the world acquiring spectrum high initial operating losses. Lower rates makes it longer for the new entrant to achieve equilibrium as most new subscribers churn from one network to another. Low Tariffs: Facet of Competition Indian telecommunications is the lowest cost market in the world. The cut throat competition among operators has left no scope of having single price leader in market as all the operators compete for lower prices and high customer base. Increased number of players has resulted in increased price wars among the competitors, with consumer being the beneficiary. Such factors declines the profit margins which are expected to consolidate the industry. Offset of price wars In mid nineties, at the start of cellular services in India, operators used to charge heavily for the incoming calls on their network. After the launch of BSNLs free incoming call facility, other operators followed the same suit. Still the major chunk of customer remained with BSNL due to its low call rates and better network coverage. With the launch of Reliance Communications as a new telecom giant, teledensity in India raised enormously to 8.2% in 2004 from that of 2.32% in 1999 and to 54.10% in April 2010 (as per TRAI).Introduction of low cost cellular services, along with handset, made Reliance the price leader in telecom industry attracting a huge chunk of customer base. Other leading service providers like Airtel, Vodafone and Hutch had to match their prices with that of Reliance. To monitor and regulate the irregularities in tariffs charged by telecom operators, Telecom Regulatory Authority of India was formed by the government of India. The Telecommunication Tariff Order 1999 started declining tariffs and influenced the rapid growth of cellular phone users. TRAI is also responsible to monitor and prevent the formation of cartels by cellular operators in the cover of associations such as COAI and AUSPI. Source: Telecom Regulatory Authority of India Source: Telecom Regulatory Authority of India Graphs show the percentage decline in national and international call rates. This occurred due to intense competition that generated after TRAI regulations. Steps taken by TRAI that affected tariffs: Interconnect Usage Charge payable by one operator to another for using their network Reduction in Access Deficit Charge also contributed in bringing down the call rates Calling Party Pays regime fixed low termination charges further reduced prices Unified Access Service License gave operators the privilege to determine tariffs Impact of price-war Price war among operators hits the revenue growth significantly. For the new entrants, the break-even point at which expenses equals revenue also increases. The decline in prices due to competition increases the consumer base to unsustainable levels. Previous data suggests that only 50% of the subscribers are new and the rest are either churning the network or keeping an additional connection. Graph shows increase in demand with decrease in price Table below shows market revenue growth in terms of MRPU. major players.jpg Marginal Revenues Per Minutes (MRPU) Graph below depicts the growth in usage actuated by reduction in tariffs. Apart from low call rates, reduced cost of handsets and free handset facility by service providers also contributed to the increase in customer base. Source: Telecom Regulatory Authority of India Non-Price Competition Recent launch of per second billing option by Tata, pushed its rivals to indulge in non-price competition. Most of the operators have now started offering similar per second billing to its customers and this has resulted in creating more pressure on margins. Value added services and customer friendly facilities like online payment, internet access and better network coverage constituted in non-price competition. Conclusion The above research and analysis of data implies that Indian telecom industry exist in oligopolistic situation where few major players are having large share of the market. Strategic change of one operator impacts the strategy of other players, resulting in interdependence among operators. High entry barriers restrict new entrants to enter the industry and regulatory authority like TRAI monitors the formation of cartel in the industry. Analysis also shows that competition in oligopolists is not only due to price-wars but other factors such as better services and low cost of handsets also influence a large customer base.

Understanding Fast Poisons Essay -- Biology Toxic Papers

Understanding Fast Poisons Toxic chemicals are all around us. Some of the fastest acting toxic chemicals, though not necessarily deadly, are literally in our houses and backyards. Castor bean, daffodil and jonquil, lily-of-the-valley, foxglove, yew, holly and other cultivated plants can be found in many gardens. Poison ivy and pokeweed can be found along roadsides, fencelines, and in fields. Dumbcane, Euphorbia (crown of thorns, pointsettia), jade, wandering Jew and other plants also can be found in many homes. All of these plants and many more are toxic because of the chemicals they contain, yet we live with them safely. In many cases, scientists don't even know what the particular chemical is that is toxic. Plants are not the only source of toxic chemicals in the natural environment. Each year a number of people (particularly in Japan) are poisoned by eating pufferfish, which contains tetrodotoxin, or by ingesting saxitoxin (also known as paralytic shellfish poison (PSP) that is sometimes present in shellfish where Red Tide (an algae "bloom") has occurred. Other people end up in the hospital because they were stung by hornets or wasps, bitten by rattlesnakes or other venomous snakes around the world, or were bitten by venomous spiders. Toxic animals, amphibians, reptiles, insects and other living nonplant creatures are more common than people think. There are more than 1,000 known species of poisonous marine species, 375 venomous snakes around the world, an uncountable number of venomous spiders, and a wide assortment of creatures that become poisonous because of something they consume or make when they metabolize or break down chemicals they consume in their foods. The chemicals in these and other common living thing... ... monoxide is only one example of how one chemical gets into the body and causes a problem. Other chemicals reduce the availability of other elements necessary to the body and can cause problems ranging from mild and reversible to severe and deadly. Instead of decreasing the availability of certain necessary elements, some chemicals cause an increase in the availability and this also causes health problems. Often, the terms for toxicity used by the medical profession are named for the organs they affect such as the liver (heptatoxcicity), kidney (nephrotoxicity), and nervous system (neurotoxicity). Partly because different chemicals cause different responses in these and other organs, there are no simple explanations--no generalizations--for the effects of exposures and each must be examined individually. Reference: Calculated Risks by Joseph V. Rodricks (1992).

Hae’s Murder

Hae orchestrated her own murder with the help of a third party to frame Adnan. Suppose the plan was to plant Hae's body in Adnan's car in order to frame Adnan. Hae's accomplice mistook Jay for Adnan (or followed Adnan's car, that Jay borrowed), and Adnan discovered Hae's body in Adnan's car, freaked out, and either confronted Adnan and they both buried the body together, or buried the body himself but pointing the finger to Adnan, or just left the body to Adnan to deal with. The anonymous tip came from Hae's accomplice. The tip was specific about pinning it on one particular person.The body was buried in a way that wanted to be found (shallow grave of 6 inches). Mr S probably received a tip or heard a rumor about the grave. Someone wanted the body to be found and led to Adnan. If Adnan had premeditated the murder, he could have pre-dug grave or dug deeper grave. It seems far fetched but we hardly know anything about Hae, except for her diary, her post-breakup letter to Adnan, and some of her Lacrosse buddies called her a tick, as in a very competitive spirit who could not let go. The picture she painted of their relationship in her diary sounded like she was more into Adnan than he was. He recounted being upset about the break up for a while but got over it because it's just high school stuff.She was in love with him despite him calling her the devil, and his sin, and endured public embarrassment by his parents at the homecoming dance. Adnan and his friends thought it was funny.Aisha recounted that Hae didn't think it was funny.Hae wrote in her diary that Adnan would have to choose between her or his religion. She believed that love will â€Å"conquer all†. She would need to make him see this, that she is above his belief. She broke up with him, started dating an older guy to make Adnan jealous, to get back at him and in hopes that he would recognize his mistake. Adnan would come running back to her and commit his undying love for her forever religion be-damned. Instead, Adnan got over her and started dating other women, multiple women, and is so casual about it. Hae becomes mad hurt, jealous, and plots her own murder to frame Adnan. By the time Jay (or Jay and Adnan) discover the body, they're probably high and freaking out. Adnan (who knew nothing) was probably having a hard time convincing Jay that he didn't do it and Jay is probably super convinced that Adnan is the killer that his mind â€Å"filled in the blanks† by the police investigation and made his story corroborate police findings. This would explain why his stories change from time to time.They may have disposed of the bodies together. idkThe identity of the anonymous tipper, the story from the neighbor boy about seeing a girl's dead body in the trunk, the coincidence of finding the body, all make me believe that there is a third person who indirectly pointed to the location of the body and blamed Adnan.

Essay on Comparing the Japanese and American Health Care...

Introduction With all the focus our country has recently put on Healthcare I thought is necessary to look at a country which has used a Universal Health care model to understand where we as a country are heading and why so many people are opposed to it. For years I have heard that Japanese healthcare was one of the best in the world and known of people who would travel to Japan to receive treatment. Japan has been at the forefront of technology and it seems that the use of that technology has helped them advance in Health Care as well. In comparing both Japanese and American Health Care Systems I am hoping to find if Japanese Health Care is better than our American Health Care System. Population and Health Status Japans 2008 total†¦show more content†¦Mortality, Infant mortality, Causes of Death Economic growth has much improved the infant mortality rate though better healthcare facilities and living conditions. Japan has fallen to one of the world’s lowest infant mortality levels at 3.6 per 1,000 live births in 2006 (Saigusa, 2006). Infant mortality is largely affected by the health of the mother, which makes pre-natal health imperative in keeping infant mortality rates low. Since Japan offers health care to all, access to prenatal care is easier to get therefore making mothers healthier and help in finding complications earlier in the pregnancy. Oddly enough, even with all the medical technological brought forth by the US we are still ranked with a higher infant death rate than Japan. In a study published by the Robert Wood Johnson Foundation and titled Americas Health Starts with Healthy Children: How do States Compare?† the report found that the high infant death rate is correlated with the lack of education of the mother. 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