In general, the forces of competition are imposing a need for more effective decision making at all levels in organizations.
Classifying customers[ edit ] Successful price discrimination requires that companies separate consumers according to their willingness to buy. Determining a customer's willingness to buy a good is difficult. Asking consumers directly is fruitless: The two main methods for determining willingness to buy are observation of personal characteristics and consumer actions.
As noted information about where a person lives postal codeshow the person dresses, what kind of car he or she drives, occupation, and income and spending patterns can be helpful in classifying. The natural priceor the price of free competitionon the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together.
The one is upon every occasion the highest which can be squeezed out of the buyers, or which it is supposed they will consent to give; the other is the lowest which the sellers can commonly afford to take, and at the same time continue their business.
Monopoly, besides, is a great enemy to good management. Because the monopolist ultimately forgoes transactions with consumers who value the product or service more than its price, monopoly pricing creates a deadweight loss referring to potential gains that went neither to the monopolist nor to consumers.
Given the presence of this deadweight loss, the combined surplus or wealth for the monopolist and consumers is necessarily less than the total surplus obtained by consumers by perfect competition.
Where efficiency is defined by the total gains from trade, the monopoly setting is less efficient than perfect competition. Sometimes this very loss of psychological efficiency can increase a potential competitor's value enough to overcome market entry barriers, or provide incentive for research and investment into new alternatives.
The theory of contestable markets argues that in some circumstances private monopolies are forced to behave as if there were competition because of the risk of losing their monopoly to new entrants.
This is likely to happen when a market's barriers to entry are low. It might also be because of the availability in the longer term of substitutes in other markets.
For example, a canal monopoly, while worth a great deal during the late 18th century United Kingdomwas worth much less during the late 19th century because of the introduction of railways as a substitute.
Natural monopoly A natural monopoly is an organization that experiences increasing returns to scale over the relevant range of output and relatively high fixed costs. The relevant range of product demand is where the average cost curve is below the demand curve. An early market entrant that takes advantage of the cost structure and can expand rapidly can exclude smaller companies from entering and can drive or buy out other companies.
A natural monopoly suffers from the same inefficiencies as any other monopoly. Left to its own devices, a profit-seeking natural monopoly will produce where marginal revenue equals marginal costs.
Regulation of natural monopolies is problematic. The most frequently used methods dealing with natural monopolies are government regulations and public ownership.
Government regulation generally consists of regulatory commissions charged with the principal duty of setting prices. By average cost pricing, the price and quantity are determined by the intersection of the average cost curve and the demand curve. Average-cost pricing is not perfect. Regulators must estimate average costs.
Companies have a reduced incentive to lower costs. Regulation of this type has not been limited to natural monopolies. By setting price equal to the intersection of the demand curve and the average total cost curve, the firm's output is allocatively inefficient as the price is less than the marginal cost which is the output quantity for a perfectly competitive and allocatively efficient market.
Government-granted monopoly A government-granted monopoly also called a " de jure monopoly" is a form of coercive monopolyin which a government grants exclusive privilege to a private individual or company to be the sole provider of a commodity.
Monopoly may be granted explicitly, as when potential competitors are excluded from the market by a specific lawor implicitly, such as when the requirements of an administrative regulation can only be fulfilled by a single market player, or through some other legal or procedural mechanism, such as patentstrademarksand copyright .
Monopolist shutdown rule[ edit ] A monopolist should shut down when price is less than average variable cost for every output level  — in other words where the demand curve is entirely below the average variable cost curve.
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Unsourced material may be challenged and removed.Game Theory: An Introduction Game Theory helps us understand situations in which decision-makers interact. A game in the everyday sense—“a competitive activity in which players contend with each other according to a set of rules.
It encompasses a wide .
Zero-sum games are a specific example of constant sum games where the sum of each outcome is always zero. Such games are distributive, not integrative; the pie cannot be enlarged by good negotiation. Situations where participants can all gain or suffer together are referred to as non-zero-sum.
Given a set of non-negative integers, and a value sum, determine if there is a subset of the given set with sum equal to given sum.
Let isSubSetSum(int set, int n, int sum) be the function to find whether there is a subset of set with sum equal to sum.
n is the number of elements in set.
The. Industry needs to rise above zero-sum competition by focusing less on who is right and more on approaches to achieve common environmental, social, and economic goals. The Zero-Sum Society: Distribution And The Possibilities For Change [Lester C.
Thurow] on feelthefish.com *FREE* shipping on qualifying offers. Written during a period of acute economic stagnation in , The Zero-Sum Society discusses the human implications of economic problem solving.
Interpreting macroeconomics as a zero-sum game. GAME THEORY Thomas S. Ferguson Part II. Two-Person Zero-Sum Games 1. The Strategic Form of a Game. Strategic Form. The strategic form,ornormal form, of a two-personzero-sum game is given by a triplet (X,Y,A), where (1) X is a nonempty set, the set of strategies of Player I.