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Essay / Research Paper Abstract
This 3 page paper considers the concept of a dominant firm from the perspective of managerial economics and considers how and why it may be anticompetitive and when there may be justification for this model. The bibliography cites 2 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEdominant.rtf
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Unformatted sample text from the term paper:
burger market, KFC in the fired chicken fast food market and Microsoft in the operating system market are examples of dominant firms, the concept of managerial economics gives increased insight
into the role, place and practices seen in dominant firms. The dominant firm is one that is able to command the majority
of the market share, this places it in a very dominant or powerful position in the market place, it is also a position that has the potential to be abused
with the use of anti competitive behavior. The dominant firm is in a price setting position, the smaller firms are then price taking firms (Nellis and Parker, 2006).
The dominant firm can often be a profit maximizing firm, with control of the market and the influence it is able to optimize the price charged against the average total
costs (Nellis and Parker, 2006). Looking at this aspect of the model there is a high degree of justification to argue that it is not beneficial and the consumers can
suffer from higher process and less innovation. There are a number of examples of this model, however it is one that is
generally seen as unhealthy on an industry where competition can serve to benefit consumers as well as drive forward innovation. The dominant firm will not want to use predatory pricing,
as they already have the high market share. Predatory pricing may help to reduce competition and increases market share further, and dominant firms will have the capability to pursue this
strategy, but as dominant firms will often have the cost advantage due to the economies of scope and scale, the use of predatory pricing may have high opportunity costs. It
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