Competition in EconomicsCompetition in Economics

Abstract models and realityAbstract models and reality

Spectrum of competitionSpectrum of competitionPerfect competitionPerfect competition

Tiny firmsTiny firmsPrice takersPrice takersIdentical productsIdentical productsOnly normal profitOnly normal profit

Prod. & Alloc. Prod. & Alloc. efficiencyefficiency

MonopolyMonopoly

Single supplierSingle supplierSets p or q.Sets p or q.Price above cost?Price above cost?Abnormal profitAbnormal profit

Inefficiency?Inefficiency?

Imperfection, e.g. OligopolyImperfection, e.g. Oligopoly

Major & minor playersMajor & minor players

High concentration ratioHigh concentration ratio

DifferentiationDifferentiation

InterdependenceInterdependence

Fierce competition?Fierce competition?

Collusion?Collusion?

Contestable?Contestable?

Competitive advantageCompetitive advantage

Definition:Definition:

– A distinctive feature that A distinctive feature that makes a business successfulmakes a business successful

InnovationInnovationPRODUCTPRODUCT

NewNew

LatestLatest

BestBest

PROCESSPROCESS

Costs cutCosts cut

QualityQuality

FocusFocus

ReputationReputation

Word of mouthWord of mouth

BrandsBrands

MarketingMarketing

RelationshipsRelationships

TrustTrust

ValueValue

InertiaInertia

Cost leadershipCost leadership

Process innovationProcess innovation

Economies of scaleEconomies of scale

Technical efficiencyTechnical efficiency

DifferentiationDifferentiation

Product innovationProduct innovation

Reputation/qualityReputation/quality

MarketingMarketing

FocusFocus

Matching requirementsMatching requirements

Niche?Niche?

Customise?Customise?

Barriers to entry/exitBarriers to entry/exit

Natural:Natural:

High start-up costsHigh start-up costs

Sunk costsSunk costs

Barriers to entry/exitBarriers to entry/exit

Artificial:Artificial:

PatentsPatents

Marketing budgetsMarketing budgets

Brand proliferationBrand proliferation

Predatory behaviourPredatory behaviour

Supply chain controlSupply chain control