L3 MARKET STRUCTURE Flashcards
What is a market?
A market is any place where two or more parties can meet to engage in an economic transaction.
What term is used to describe markets involving illegal transactions?
They are defined as “illicit markets.”
What can transactions involve in a market?
Transactions may involve goods, services, information, currency, or any combination of these.
How does the government regulate legal markets?
The government regulates legal markets by implementing terms and conditions, such as taxes.
What is market power?
Market power is the ability of a firm or group of firms to profitably charge prices above the competitive level.
What are the consequences of having market power?
It allows firms to shut out competitors, charge high prices, and produce low-quality products.
What negative effects can market power have on society?
It can lead to a less fair, less dynamic, and less innovative market environment, reducing economic wealth.
What lawsuit did the United States Department of Justice file against Google?
The lawsuit accused Google of using anticompetitive tactics to maintain and extend its monopolies in search and advertising markets.
How is Google accused of limiting consumer choice?
By prioritizing its own services in search results, making it difficult for users to find competing products or services.
What criticism is directed at Google’s data collection practices?
Critics argue that Google’s data collection is intrusive and collects more user data than necessary without clear consent options.
Why is defining the relevant market important for the government?
It is crucial for tax and competition regulation.
How do businesses benefit from defining the relevant market?
They can set their prices based on the prices of substitutes identified in the relevant market.
What is the benefit for consumers in defining the relevant market?
Consumers enjoy incentives for companies to innovate and an increased number of choices.
What is a key takeaway regarding the monitoring of markets in the digital economy?
It is crucial to carefully monitor niche and dual markets to ensure they are well-defined and appropriately regulated.
What should the government’s role be in new market emergence?
The government should focus on setting up regulations and creating an environment that encourages fair competition.
What does industry concentration refer to?
It refers to the extent to which market sales are dominated by one or more businesses.
What are the main impacts of IT on the industry?
Increased concentration
Turbulence in market dynamics
Performance spread among companies
Digitalization of processes through enterprise IT systems
Dominance of innovators with better methods
Accelerated competition
How does industry concentration affect competition?
It allows major participants to easily track competition and coordinate prices.
What characterizes turbulent markets?
The top-selling company one year may not dominate the next year.
What are the characteristics of perfect competition?
Many buyers and sellers with small size
Homogeneousa product
Perfect information for buyers and sellers
Free market entry and exit
Equal access to technologies
What happens to profits in the long run in a perfectly competitive market?
All firms will generate normal profits due to market entry and exit.
How does a monopoly affect market prices?
A monopoly can fix prices, leading to high prices and limited choices for consumers.
What are 3 advantages of a monopoly?
Economies of scale
Stability of prices
Increased R&D spending
What is an oligopoly?
An oligopoly consists of a few companies that exert significant influence over a market.
What are some advantages of oligopoly?
Non-price competition, joint R&D, and economies of scale.
What factors make it easier to become a monopoly in the digital economy? (6)
High switching costs
“Winner takes all” phenomenon
Economies of scale
Convergence of digital services
AI & Data analytics
Difficulty in regulation
What are the potential uses of IT in market competition? (5)
Threat of new entrants
Buyers’ bargaining power
Suppliers’ bargaining power
Threats of substitute products and services
Competition among traditional rivals
