3.5: Competition Flashcards
What is competition in a market system?
Competition is the condition in a market system where many rival sellers provide goods and services to many buyers.
It is natural and desirable as it ensures businesses produce what society needs, and no one seller can dominate the market.
What are the advantages of competition in a capitalist system?
Competition ensures goods and services are provided at low costs, reduces waste and inefficiency, and holds profits to a minimum.
It also widens consumer choice, regulates prices, and fosters innovation through rivalry among businesses.
How does competition influence business partnerships in a capitalist system?
Businesses may establish partnerships, such as value chain partnerships, to benefit from mutual strengths and core competencies.
These partnerships allow businesses to keep up with rapid innovation and compete effectively in the market.
What are some business strategies to improve competition?
Strategies such as vertical and horizontal integration help businesses consolidate their position in the market.
Vertical integration involves controlling more of the supply chain, while horizontal integration involves acquiring competitors to increase market share.
What are the ethical implications of competition?
Perfect competition rarely exists, as some industries form oligopolies, where a few companies control the market.
Governments regulate prices in key sectors, but corporations can engage in anti-competitive practices like price fixing.
Ethical concerns arise when competition is stifled, and prices or wages are manipulated.
What is an oligopoly, and how does it affect competition?
An oligopoly occurs when a few large companies dominate an industry, often leading to price leadership where competitors follow the pricing strategy of one dominant firm.
This can reduce true competition and increase prices for consumers.
What role does government regulation play in competition?
Governments regulate industries to prevent monopolies and ensure fair competition.
This can include controlling prices, taxation, regulating wages and profits, and setting tariffs.
However, in some cases, government action replaces the “invisible hand” of the free market.
What was the dispute between Flair Airlines and Swoop about?
Flair Airlines accused Swoop (WestJet’s low-cost offshoot) of unfair competitive practices, such as low-cost pricing and schedule manipulation, which led Flair to drop routes.
Flair filed a complaint with the Competition Bureau, citing anti-competitive behavior from Swoop.
How did Flair Airlines argue that its business model is fiscally sustainable?
Flair argued that its ULCC (Ultra Low-Cost Carrier) model was fiscally sustainable, as it did not bear the legacy costs of larger parent companies.
Flair claimed that Swoop’s model, backed by a larger parent company (WestJet), made it difficult for Flair to compete fairly.
