17 Introduction to Monopoly

17 Introduction to Monopoly - Introduction to Monopoly...

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Introduction to Monopoly 2/18/11 12:00 AM PLEASE DISREGARD NOVEMBER 2 ND NOTES, THESE ARE THE REAL MONOPOLY NOTES Introduction Monopoly : a firm that is the sole seller of product without close substitutes (i.e. Japanese restaurant, only one in town, with no close substitutes (other ethnic food that others consider close substitutes)) Monopoly has market power , the ability influence the market price of the product it sells o MS Dos was unique, spread, had market power o Apple entered Mac OSX o Microsoft came out with Windows to maintain market power Why monopolies arise The main cause of monopolies is barriers to entry: o Government: Gives a single firm the exclusive right to produce a good (patents, copyrights) Makes a single firm the exclusive legal provider of a good (public franchises) (energy companies) o A single firm owns a key resource (DeBeers) o Pioneer’s network externalities (facebook) Increase network externalities by introducing to more colleges, and the more people use it, the more people
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17 Introduction to Monopoly - Introduction to Monopoly...

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