...Research Paper: Market Structure Professional Sports ABSTRACT Economic theory introduces us to four different types of markets: perfect competition, monopolistic competition, oligopoly, and monopoly. Professional sports teams operate in an environment that is different than the typical business structure. The goal of this paper is to look at this industry, in particular the NFL, in an economics context and gain an understanding of the market structure of this unique industry. To do this I will discuss a brief history of the National Football League in the U.S. and how this organization is structured. I will also discuss typical market structures and type of market structure that professional sports may fit into. Further I will briefly discuss the economic concept of a monopsony and how sports leagues such as the NFL exhibit those characteristics. Market Structure and Professional Sports Teams Introduction Teams like the Carolina Panthers, New York Yankees or the L.A. Lakers are part of national leagues of professional team sports such as the NFL, MLB, and NBA. These professional sports teams operate in an environment that is different than the typical business structure. The National Football League is an economic juggernaut. As of 2011, it reportedly makes an estimated $6 billion per year in ticket sales, merchandising and contracts with television networks...
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...10.1 MONOPOLY A Rule of Thumb for Pricing Chapter 10: Market Power: Monopoly and Monopsony We want to translate the condition that marginal revenue should equal marginal cost into a rule of thumb that can be more easily applied in practice. To do this, we first write the expression for marginal revenue: Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 7e. 9 of 50 10.1 MONOPOLY A Rule of Thumb for Pricing Chapter 10: Market Power: Monopoly and Monopsony Note that the extra revenue from an incremental unit of quantity, ∆(PQ)/∆Q, has two components: 1. Producing one extra unit and selling it at price P brings in revenue (1)(P) = P. 2. But because the firm faces a downward-sloping demand curve, producing and selling this extra unit also results in a small drop in price ∆P/∆Q, which reduces the revenue from all units sold (i.e., a change in revenue Q[∆P/∆Q]). Thus, Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 7e. 10 of 50 10.1 MONOPOLY A Rule of Thumb for Pricing Chapter 10: Market Power: Monopoly and Monopsony (Q/P)(∆P/∆Q) is the reciprocal of the elasticity of demand, 1/Ed, measured at the profit-maximizing output, and Now, because the firm’s objective is to maximize profit, we can set marginal revenue equal to marginal cost: which can be rearranged to give us (10.1) Equivalently, we can rearrange this equation to...
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...A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopoly which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[1] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[2] The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is business entity that has significant market power, that is, the power, to charge high prices.[3] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4] A monopoly is distinguished from a monophony, in which there is only one buyer of a product or service ; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and the other companies (oligopoly) in a game theoretic manner...
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...MONOPSONY Prepared By: Nitish Vashist (D14017) XLRI-2014-17 INTRODUCTION The term monopsony first introduced by Joan Robinson in his book in 1933. Monopsony is defined as form of market in which only one buyer will act as interfaces for multiple sellers of a particular product. It also referred as Buyer’s monopoly. There are many examples in history and in the world of monopsony like the Giant wine maker’s Ernest and Julio who were having immense power of buying grapes from growers, that seller had no choice but agree to their terms and conditions. So we can also say buyers have the power to rule the market and manipulate the supply and demand accordingly. OVERVIEW There are many examples of monopsony but here I am going to take important one only. First will try to understand monopsony in the labor market how it works and how it effects the people. For example 1.0: In Jharkhand, coal minining is considered as major source of employment most of the labors from nearby areas and other areas look forward for jobs here. But if they didn’t get job here then they left with few alternatives and so employer took the advantage of this situation and exploit the labor’s by offering lower wages and facilities. So we can say Employer are controlling the labor market accordingly. We can understand this more with the help of below shown graph of monopsony exploitation. Here we can see increase in Marginal Cost of labor higher than average cost if we try to increase the number the labor’s...
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... Debate Are government controlled monopolies better than perfectly competitive markets? yes government controlled monopolies are better than perfectly competitive markets:- 1. The reason that governments tolerate monopolies is because they are also one themselves. They have ultimate monopolistic control and the legitimate use of power and force. Whether it’s criminal justice, police, military or mail almost all government agencies function as a monopoly. They also like to give out monopoly favor to some of their well connected friends. 2. Monopsony power. A firm with monopoly selling power may also be in a position to exploit monopsony buying power. For example, supermarkets may use their dominant market position to squeeze profit margins of farmers. source:- http://en.wikipedia.org/wiki/Government_monopoly no government controlled monopolies are not better than perfectly competitive markets:- 1. I think the formation of monopoly is very important , especially during the time of recession. They can push out infant firms and became internationally competitive. The fact that they have an EOS can reflect cheaper prices of their products. However they have to earn abnormal profits , therefore they have to minimize total costs , to do that they have to pay less to their employees. That is the only disadvantage. 2. A monopoly is allocatively inefficient because in monopoly the price is greater than MC. P > MC. In a competitive market...
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...Occupational segregation | The dominance of an occupation by one gender | Primary sector | The first stage of production, agriculture | Secondary sector | The second stage of production, processing raw materials | Tertiary sector | The third stage of production, providing services | Tax wedge | The gap between what employers pay for labour & what workers receive in disposable income | Outsourcing | Subcontracting part of the production process to another firm | Offshoring | Transferring part of the process to another country. The production might be outsourced or may be undertaken by the firm but in another country | Tourism income multiplier | The extent to which a change in income from tourism causes GDP to change | Monopoly | A single seller | Efficiency Economic efficiency * A situation where: each good is...
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...in which this organization competes. Clearly indicate why the market structure was decided upon and how this market structure differentiates from the other alternatives. MARKET STRUCTURE The interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market (“Market Structure”, 2016). There are four basic types of market structure: Perfect competition, oligopoly, monopoly, and monopsony. McDonald’s is one of the leading companies in the fast food industry (Internationally and in the U.S.). Although McDonald’s is leading the industry with a sizeable gap, other leading companies such as Wendy’s, Burger King, and KFC are taking market share as well. Due to all these companies, it would not be considered a monopoly. McDonald’s is considered an oligopoly. An oligopoly is where only a few firms dominate the entire market. Therefore, the market is highly concentrated. McDonald’s use a key component known as interdependence to rely on the actions of other businesses. McDonald’s does this so they can predict the movements of other businesses. By predicting their movements, McDonald’s is able to make a strategy to become and stay successful. Generally, no one firm will control the entire value chain, but some firms may decide to integrate horizontally or vertically...
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...The Four Factors of Production in Economics 1. Land * Land refers to the natural resources that are available and used in the production of goods. For example, a heavy mining industry could not exist without the natural deposits of valuable minerals in the ground, while a thriving farming community would have a hard time surviving with poor soil and no rainfall. Labor * Labor refers to the human inputs of work to produce the goods and services. For example, the training required for employees to successfully operate machines to produce cars would be considered as part of labor. In addition, the mental capacity to perform tasks and invent new products is also part of labor. The only human element not included in labor is entrepreneurship. Capital * Capital refers to the tools and machines that are required for the production of the product. For example, when making cars, the capital would include the factory and all the machinery in the factory used in making the car. On a farm, the capital would include the tractors, harvesters and other equipment used to grow crops or raise livestock. What Are the Principles of Economics? Economics is fundamentally the study of how people react to and allocate finite resources. More often than not, the principles of economics are driven by people's tendency to act in their own self interest, i.e., greed. However, the desire to maximize one's own benefit generally has the broader benefit of allocating resources across society in...
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...FREE MARKET ECONOMY According to Pmiranda2857 (2009), the free market economy is an economy which promotes competitions between businesses. Basically, without this market system, consumers would not have a say in price determination of goods and services. Some consumers in some African countries have suffered with regards to pricing. According to Baye (2010), consumers do not have a say in the price determination of some services because the providers of such services enjoy the market monopoly. However, the free market economy is the best and only realistic alternative for determining the allocation of resources in an economy because of the following: i. Competition (Pmiranda2857, 2009; Rothbard, n.d.). Without competition, the free market economy will not be what it is supposed to be. The competition between the producers is the driving force in this market, providing the consumers with the most favourable product at the most affordable price. According to Pmiranda2857 (2009), a new product is priced high in the market. After sometime, the major competitors in the market begin to imitate the innovation in the market. This leads to price reduction in the once expensive product since new and similar products begin to emerge. Pricing therefore becomes a sensitive issue in competition. Rothbard (n.d.) also concluded that competition leads to the betterment in the standards of the market competitors compared to other markets. ii. It promotes entrepreneurship and innovation (Pmiranda2857...
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...pressure to adopt the best techniques or to hold down their costs. He referred to this effect as "x-inefficiency." If x-inefficiency causes a firm's marginal costs to rise, show that the deadweight loss in Figure 10.10 understates the true deadweight loss caused by a monopoly. If the monopoly were more efficient, its marginal costs would fall—from MC1 to MC2 in the figure. As the figure shows, if a monopoly has higher costs (MC1) because it does not face competition, then the true deadweight loss is increased. The darker shaded area shows the original deadweight loss as it was in Figure 10.10. The lighter shaded area shows the additional deadweight loss from taking into account x-inefficiency—that is, from the firm not producing more efficiently, at quantity QCX. 3. Use the following graph for a monopoly to answer the questions. a. What quantity will the monopoly produce, and what price will the monopoly charge? To maximize profits, the monopoly will produce the quantity where marginal revenue equals marginal cost. So, the monopoly will produce 20 units and charge a price of $30. b. Suppose the government decides to regulate this monopoly and imposes a price ceiling of $18 (in other words, the monopoly can charge less than $18 but...
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...Differentiating Between Market Structures Don Peterson ECO/365 February 2, 2015 Elena Zee Differentiating Between Market Structures A market structure in economics describes the state of a market with respect to its competition. There exist several different market structures like perfect competition, oligopoly, and monopolies among others. These markets all produce different types of goods or services, like public and private goods as well as common and collective goods. Firms operating in these different market structures utilize the labor market in very different ways because of very diverse uses of labor in each market structure, so it is important for a firm to use the labor market equilibrium principles to their advantage to efficiently cover the costs of production and maximize profits. In economics, a good is something defined as any object, service or right that increases utility, directly or indirectly (Colander, 2013, Chapter 13). Goods are further broken down into public and private goods. A public good is a good that can be used simultaneously by many consumers, which is called non-rival, and people who have not paid for the good cannot be excluded from its utility, which in economics is call non-excludable (Moffatt, n.d.). Together this means that the consumption of a public good by an individual does not affect the availability of that good to anyone else, which is called being non-rival and non-excludable. It can be seen however, that a truly...
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...Professor Owen R. Phillips University of Wyoming Ross Hall 124 COURSE SYLLABUS FOR INTERMEDIATE MICROECONOMICS 4020 Course Description and Prerequisites Economics is broadly defined as a way of thinking about problems of allocation. This course entails the use of intermediate microeconomic theory in the analysis of problems facing decision-makers, not only in business, but also in government and other nonprofit organizations. Intermediate microeconomic theory can be described as the theory of choice. It has application to all decision problems. Specific theoretic tools are developed and applied to real world settings in order to illustrate optimal decision guidelines. The prerequisites for this course are a beginning economics class in microeconomics and a basic understanding of algebra and geometry. Required Textbook Required: Pindyck, Robert S. and Rubinfeld, Daniel L., Microeconomics, Third Edition, Prentice-Hall, 1995, ISBN 0-02-395900-2. Determining Your Grade During the course there are two “midterm” examinations. At the end of the course there is a comprehensive final examination; in the final exam there is some emphasis on the material following the second examination. All of the exams consist of multiple choice questions. Questions will be of a problem-solving nature much like those assigned in the homework. The homework questions are excellent preparation for the examinations. Answers to many of these questions are worked in the...
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... The example of oligopoly in the Philippines I see are those small time v endors in the market place that has grown into a gigantic proportion that dominated the bigger sellers in that particular place. As definite by the description of oligopoly(small number of sellers). The opposite of oligopoly is monopoly A monopoly (from Greek monos μόνος (alone or single) + polein πωλεῖν (to sell)) exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[1] Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power, to charge high prices.[3] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market) example of which are the oil petroleum products like...
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...BY SHAHZAD MIRZA UKCBC PARK ROYAL LONDON ID: 12878-RB HND BUSINESS MANAGEMENT LECTURER: MR TAIWO OLAJUMOKE BATCH: 11 LEVEL: 4 BY SHAHZAD MIRZA UKCBC PARK ROYAL LONDON ID: 12878-RB HND BUSINESS MANAGEMENT LECTURER: MR TAIWO OLAJUMOKE BATCH: 11 LEVEL: 4 BUSINESS ENVIROMENT | Introduction | 3 | 1.1 | Identify the purpose of organisations | 3-4 | 1.2 | Describe to which extent Iceland Supermarket Ltd meets objectives of its different stakeholders. | 5-6 | 1.3 | Explain various responsibilities of Iceland | 7 | 2.1 | Different economic systems | 8-9 | 2.2 | Fiscal and monetary policy | 10-12 | 2.3 | Competition policy and other regulatory mechanism | 13-14 | 3.1 | Market structures determine the pricing and output decisions | 15-21 | 3.2 | Which market forces shape Iceland Supermarket responses | 21-22 | 3.3 | How the business and cultural environments shape the behaviour of Iceland | 22-23 | 4.1 | Significance of international trade to Iceland Supermarket | 23 | 4.2 | Impact of global factors on Iceland Supermarket | 24 | 4.3 | Impact of policies of the European Union on Iceland Supermarket | 25 | | Conclusion | 26 | | References “ | 27 | ...
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...Opportunity for normal profits in the long run.P=MC, P=AR=AC.6.Price takers., profit maximization in competitive markets (P=MR=MC), possibility of short-run economic profits but normal profits in long run, competitive firm short-run supply curve (MC above AVC)P>AVC, market supply with entry and exit, competitive market equilibrium in long run with normal profits and P=minimum ATC . Competitive firm long run supply curve:P>ATC.Normal profit: the rate of return necessary to attract capital investment, is included as part of the financing costs included in total cost. Economic profits: is above normal rate of return. Marginal analysis: total profits is maximized when the difference between MR nd MC is 0. MR=MC=P Chapter 12 Characteristics of monopoly:1. A single seller. 2. Unique products. 3. Blocked entry and exit. 4. Imperfect information. 5. Opportunity for economic profits in long run equilibrium....
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