In my case study I will use Premdor Corporation in United States to analyse the antitrust practices and market power. The firm have been investigated severally for antitrust behaviour. For example in 2010, the company violated Section 1 of Sherman act. The court was against the agreement between Premdor and the car rental company. The firm wanted to impose unlawful fees on rental car companies.
Purpose of antitrust analysis is to answer questions that should be well settled. Antitrust law now requires proof of actual or likely market power or monopoly power to establish most types of antitrust violation .These legal rules follow prevailing antitrust practices. Monopoly power should play a crucial role in defining the extent of most antitrust proscriptions.
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Examination of key antitrust law opinions, however, shows that courts define market power and monopoly power in ways that are both vague and consistent .Present level of confusion is unnecessary and results from two different but related errors. Attempting to distinguish between market power and monopoly power create a false dichotomy.
Locative efficiency, dead weight is what antitrust is all about. This perspective shades into ex-efficiency or waste of scarce resources Real differences with significant legal and policy implication do exist. However, this would happen between non-competitive economic powers that are exercised by restricting one’s rivals (Jacobson, 2007). Identifying this fundamental distinction and discarding the false one can help to clarify other troublesome antitrust issues as well.
An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market. For example, major airlines use their routes with only a few close competitors, but there are also many small airlines catering for the holidaymakers or offering specialist services (Jacobson, 2007)
Monopolies and oligopolies being general firms that demonstrate power have the good and the ugly to the economy. Oligopoly is a market that has a small number of organizations that are moderately large and that control an industry. This results to a considerable control in a market. Market control implies that interdependence amid organizations in an industry is effective. Therefore, the actions of one organization are contingent on and impact the actions of one or more organization. On the other hand, monopolies are good for the society for the reason that they do not pursue profit maximization outlines as their costs tend to be lower that those of forms that have low specialization levels. Therefore, there are fewer resources wasted for economy and this is of advantage to the society. An instance of how having a monopoly can be of significance to the society for the reason that it is the only provider in the market; it thus faces a descending slanted demand curve. Due to this, the monopoly is able to pick its price and amount in accordance to the demand in the market (Wadarna, 2012).
Participants that have market power are therefore sometimes referred to as "price makers," while those without are sometimes called "price takers." Significant market power is when prices exceed marginal cost and long run average cost, so the firm makes economic profits (Mak, 2004).
Tourism attraction is exposed to natural monopoly or non-substitutability due to its uniqueness, regional differences and immobility. Public attraction is usually monopolized it is important for this sector to realize that economic regulation is also important. This undertaking can be used to enhance social welfare by controlling excessive monopoly.
To protect the requirement of common will, economic regulation can be applied. This is to supervise the proprietors of tourist attraction not to abuse their monopoly powers. They can easily do that by sacrificing the visitors to gain largest interests (Wei & Mingzhu, n.d.).
Since we now consider a downward sloping demand curve, the quantity and services the consumer will buy could be more than one and will depend on the price. Therefore, a relevant measure to compare consumer choices would be the consumer surplus (Lectures, 2O12).
As the industry grows the international world make the industry competitive and more efficient. Improvement in infrastructure such as roads and sewerage is noted. There is also massive improvement in private sector investments (Wadarn, 2012). A firm with market power can raise prices without losing its customers to competitors this solidly depend on the quality the firm give to their customers (Mak, 2004).
In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit. If producing additional vehicles requires, for example, building a new factory, the marginal cost of those extra vehicles includes the cost of the new factory.
The competitive process only works when competitors set prices honestly and independently. When competitors collude, prices are inflated and the customer is cheated. Price fixing, bid rigging, and other forms of collusion are illegal and are subject to criminal prosecution by the Antitrust Division of the United States Department of Justice.