1. Disadvantages
   1. Less consumer choice
   2. Higher prices
      1. D is price inelastic
   3. Lower product quality
      1. no incentive
   4. X efficiency
      1. inefficiently run & high production cost
   5. The need for regulation
      1. State has to monitor action that might conflict with public interests
2. Advantages
   1. Large capital for innovation (high profit)
   2. Cost saving -> P reduction
   3. Productivity enable P reduction
3. How it is used?
   1. short-term strategies
   2. boost sales & market share
   3. Attack rivals
4. Barriers to entry
   1. Natural
      1. Economies of Scale
         1. Average costs lower than individual firms combined (natural monopoly)
         2. Not make sense to have many sets of infrastructures
         3. e.g. gas, electricity, pipeline
      2. Capital size
         1. Large initial financial set-up for new competing firms
      3. Historical reasons
         1. Advantage of first-established firm
      4. Legal considerations
         1. granting of patents/copyrights = legal monopoly
   2. Artificial
      1. Restrictions on supplies
         1. Monopoly threaten to shift away from suppliers
         2. condition: few suppliers, suppliers biz rely on monopoly
      2. Predatory pricing
         1. Big firms cut P (incur loss in SR) to force new firms out
         2. Small firms have low product diversificaiton thus not able to withstand
      3. Exclusive dealing
         1. Monopoly prevent retailers from stocking other brands
         2. condition: popular firm, retailers make lots of trade from the product
      4. Full line forcing
         1. Large multi-product firms require retailer to stock the rull range of products
5. 1) Why do firms compete?
   1. Aims
      1. To increase sales (even existing customers to spend more)
      2. For customer base (increase number of customers)
      3. Expand mkt share (proportion of volume sold to market)
         1. Ability to withstand new competition
      4. Product superiority (product better than rival/outselling)
      5. Enhance image (Customers' perception)
      6. For sales & profit
   2. Types of competition
      1. Price competition
         1. Undercutting rivals
         2. constraints
            1. market conditions
            2. costs of production (dec margin)
      2. Non-Price competition
         1. aspects customers look for other than P e.g. after-sales services
         2. strategies
            1. promotion e.g. give away, rebate coupon
            2. advertisements e.g. willing to pay more
   3. Competition Good or Bad ?
      1. Good - lower P, better quality, choices
      2. Bad - wasteful of resources used in sales activities, cost pushed to consumers
6. 2) Pricing strategies
   1. Penetration pricing
      1. set low P for new establishing product for consumer to try
   2. Expansion pricing
      1. Low P>Demand inc > EoS > low avg costs > can keep P low or profit
   3. Market skimming (aka price creaming)
      1. Premium price charged on early adopters
      2. Oft used in consumer tech products
   4. Price wars
      1. Sucessive price cuts to steal customers
      2. High risk strategy
      3. Good for consumers in short-run
      4. Long run may be bad if less producers
   5. Price leadership
      1. Dominant producers set price in line with one another
   6. Destruction pricing (aka predatory pricing)
      1. Large firms set P extremely low push out smaller new firms
7. 3) Market Structure
   1. What?
      1. How market is organised in terms of how much competition there is on supply side
      2. Degree of competition -> resource allocation
         1. Amount of control a firm(s) has over market supply
         2. Degree of influence a firm(s) have over market P
         3. Freedom of new suppliers have to enter market
         4. Barriers to entry that restrict new competition
   2. Types
      1. Competitive markets
         1. Large number of sellers & buyers
         2. No one can influence market P, everyone = price takers
         3. Firms that raise P will be driven out of market or others copy the method
         4. Extreme case: Perfectly competitive e.g. agricultural products
      2. Non-competitive markets
         1. Characteristics
            1. Some firms have power to restrict competition
            2. Market P & Q can be influenced by some suppliers
         2. Monopolistic
            1. One firm controls all supply in market
            2. Monopoly = price maker
            3. obtain excess profits (abnormal profit)
            4. Prevent new firms from entering to share profit
         3. Oligopolistic
            1. Small numbers of firms control supply
            2. Duopoly e.g. P&G-Unilever, Boeing-Airbus
            3. Sometimes practice collusion
            4. Cartel = formal agreement to regulate market Q & S
            5. aim to set artifiicially high P
            6. mostly outlawed as against public interst
            7. Legal strategies
            8. Price leadership
            9. Non-price competition
         4. Limitation on market power
            1. 'Contestable market' = Low barrier to entry
            2. Monopoly acts competitively to ward off new competitors