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Using 'Real World' examples, illustrate both some of the potential benefits of monopolies and explain how monopoly firms may be able to engage in price discrimination practices.

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Introduction

Christopher Raw, P02327260, Bus. Env, Corp 1111, BH 3.6, A. Sharhim Using 'Real World' examples, illustrate both some of the potential benefits of monopolies and explain how monopoly firms may be able to engage in price discrimination practices. A monopolistic market or company is one where there is non existent competition. There is one leading market domineer that is producing and supplying the entire market. In a monopolistic market the company in question can determine prices or the amount of products sold to work in their advantage. The power of a monopoly company is that it can completely dominate a particular market subject to whether or not there are existing or up and coming substitutes. By this what is meant is that there could well be a substitute for the monopolist's product. An example of this would be old public sector companies like British Rail. They controlled the entire rail travel market; however there were always alternative forms of travel like coach or air travel. ...read more.

Middle

First, the company must know its customers and know that they have different demands to that of other people. This may be the travel of commuters into the city for work. The company may see them as a priority customer as they will use there service everyday during the mornings. The travel company may decide that it could price discriminate against the commuters by increasing the price during the mornings. The commuters will still pay the higher prices because it is imperative that they arrive on time for work. This enables the company to segregate its customers through cheaper prices during the afternoon period rather than the busy morning period. For all of this to happen the company must be of a monopolistic nature. An example of a monopolistic company or group of companies is OPEC. This is the Organisation of Petroleum Exporting Countries. These are a group of producers that act as a unit to control the supply t the market of petroleum based substances (e.g. ...read more.

Conclusion

An example of this is the competition of Microsoft and Apple Macintosh. Microsoft have revolutionised the computer software and hardware industry over the past two decades. It now has over 90% of all computers in the USA using a Microsoft Windows based program. This significantly suggests that it is indeed a monopolistic firm. By doing this it is allowed to charge premium prices on the market for its products such as Microsoft Office. It now has the majority of other software such as games and other programs having to be compatible to run with Microsoft Windows. The world has seen many monopolies before, mostly on national or local level, but it is probably safe to say that Microsoft has easily become the biggest commercial monopoly because of its worldwide dominance. Overall, many monopolies have used the advantage of price discrimination against the consumer. However they can only exploit the price through knowing there customers, e.g. Virgin trains, Rail track, etc. There is an increasing rate in monopolistic competition that could increase the competition through the emergence of alternative forms of product. ...read more.

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