February 2, 2016

MARKET MODELS

MONOPOLY

Amonopolyisamarketstructureinwhichthereisonlyone
producer/sellerforaproduct.
In other words, the single business is the industry.
Entry into such a market is restricted due to high costs or other
impediments, which may be economic, social or political.
For instance, a government can create a monopoly over an industry that it wants

to control, such as electricity.

Another reason for the barriers against entry into a monopolistic industry is that
oftentimes, one entity has the exclusive rights to a natural resource. For example,
in Saudi Arabia the government has sole control over the oil industry. A monopoly
may also form when a company has a copyright or patent that prevents others
from entering the market. Pfizer, for instance, had a patent on Viagra.
Read more:
Economics Basics: Monopolies, Oligopolies and Perfect Competition |
Investopedia
http://www.investopedia.com/university/economics/economics6.asp#ixzz3yl6Nbg3
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A patent (/ptnt/ or /petnt/) is a set

of exclusive rights granted by a
sovereign state to an inventor or
assignee for a limited period of time in
exchange for detailed public disclosure
of an invention. An invention is a
solution to a specific technological
problem and is a product or a process.

MANILAGloria Santos gets her electricity

from one monopoly, the Manila Electric Co.,
and her water from another, the
Manila Water Co.
The result of having no choice, she and
other backers of a new antitrust law
contend, is far higher bills and poor service.
Manila Electric Co.commonly called
Meralcoand Manila Water Co. say their
rates are reasonable. On their websites,
both companies say they strive to meet the
highest possible service standards.

However, utilities like them face no

competition, or incentive to improve their
services, and have frequently raised prices.
Water bills alone have shot up sixfold since
1997around the time the government was
privatizing national state-run monopolies
including utilitieswhich is way ahead of
inflation.

These things need to be cheaper, said

Manila resident Ms. Santos, 49, who
with her mechanic husband supports
four children on $580 a month, of which
$65 went toward power and water last
month.

GOOD NEWS???

The Philippines new Competition Actsigned

into law in Julycreates a commission tasked
with rooting out anticompetitive business
practices, policing mergers and filing antitrust
cases.
But in a country in which the government has
given exclusive contracts to the utility
subsidiaries of some of the countrys biggest
companies, it remains unclear just how
aggressive the panel will beor how effective.

GOOD NEWS???

The idea that there should be economic

justice [is new to the Philippines],
Yet the laws backers worry about how much
power the Competition Commission will have
to lower bills, since utility companies operate
through legally binding service agreements
signed with the government. The operating
contract of Manila Water, which is controlled
by Ayala Corp., one of the Philippines biggest
conglomerates, lasts until 2037, for example.

Ms. Santos said that if the new

commission doesnt intervene, then no one
will. They have to tell these companies
what the people of the Philippines want,
she said.

PURE MONOPOLY

A puremonopoly has pricing power

within the market. There is only one
supplier who has significant market power
and determines the price of its product. A
pure monopoly faces little competition
because of high barriers to entry, such as
high initial costs, or because the company
has acquired significant market influence
through network effects, for instance.

One of the best examples of a pure monopoly is

the production of operating systems by Microsoft.
Because many computer users have
standardized on software products that are
compatible with Microsoft's Windows operating
system, most of the market is effectively locked
in, because the cost of using a different operating
system, both in terms of acquiring new software
that will be compatible with the new operating
system and because the learning curve for new
software is steep, people are willing to pay
Microsoft's high prices for Windows.

OLIGOPOLY

In an oligopoly, there are only a few firms

that make up an industry. This select group
of firms has control over the price and, like
a monopoly, an oligopoly has high barriers
to entry.
The products that the oligopolistic firms
produce are often nearly identical and,
therefore, the companies, which are
competing for market share, are
interdependent as a result of market forces.

ILLUSTRATION:

Assume, for example, that an economy needs

only 100 cellphones. Company X produces 50
cellphones and its competitor, Company Y,
produces the other cellphones. The prices of
the two brands will be interdependent and,
therefore, similar. So, if Company X starts
selling the cellphones at a lower price, it will get
a greater market share, thereby forcing
Company Y to lower its prices as well.

PERFECT COMPETITION

Opposite of monopoly
characterized by many buyers and sellers,
many products that are similar in nature and, as
a result, many substitutes. Perfect competition
means there are few, if any, barriers to entry for
new companies, and prices are determined by
supply and demand.
Thus, producers in a perfectly competitive
market are subject to the prices determined by
the market and do not have any leverage.

The best examples of a purely

competitive market are agricultural
products, such as corn, wheat, and
soybeans.

EFFECT OF LACK OF
COMPETITION

The effect of lack of

competition due to
Philippine protectionism on
end consumers is lesser
income. Consumers have
lesser income because of
higher costs charged by
monopoly businesses telephone, electricity,
water, entertainment, and
transportation.

What consumers need to know about the PH

Competition Act

PICTURE THIS:

You are at a supermarket, and you find that

prices of garlic have more than doubled
almost overnight.
investigation
he findings showed that due to loopholes in
the Bureau of Plant Industry (BPI) system
of issuing plant quarantine clearances,
along with collusion, a cartel was able to
control 75% of all garlic imports in the
country.

Cartel is an agreement between

competing firms to control prices or
exclude entry of a new competitor in a
market. It is a formal organization of
sellers or buyers that agree to fix selling
prices, purchase prices, or reduce
production using a variety of tactics.

Garlic prices caught the attention of

Malacaang when they reached a high
of P287 ($6.58) per kilo in June 2014
a 74% increase within a one-year period
and more than 100% increase from
average prices.
About 73% of garlic demand is supplied
by imports, while the remaining 27%
comes from local sources.

The NBI found that the BPI seldom gave

permits to importers who were not
members of Vieva Philippines and
denied applications to non-Vieva
affiliates without sufficient reasons.

Senator Paolo Benigno Bam Aquino

IV is the principal author of the 2014
Philippine Competition Act, which seeks
to prevent this type of unfair business
practice.

Benefits to consumers

The act seeks to level the playing field

by prohibiting anti-competitive
agreements, abuses of dominant
positions, and mergers and acquisitions
that limit, prevent, and restrict
competition.
airline industry as an example
Nokia

The end goal is to provide benefits to

consumers through more choices and
lower prices which, Aquino said, market
competition provides.
ASEANMembership: 10 States Brunei
Darussalam, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines,
Singapore, Thailand, and Vietnam. 1
Observer Papua New Guinea.

THANK YOU!!!
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