Inter-firm Relations at Copenhagen Business School | Flashcards & Summaries

Lernmaterialien für inter-firm relations an der Copenhagen Business School

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TESTE DEIN WISSEN

What are the main questions regarding the organisation of an industry?

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  • How an industry works?
  • What and how much is produced?
  • Who produces and who buys?
  • How are production and consumption allocated?
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What is the difference between Industrial Organization and microeconomics?

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  • Focus on the organisation of specific industries
  • Focus on firms' strategies that are characteristic of market interaction: price competition, product positioning, advertising, research and development
  • Focus on oligopoly, that is, competition between few firms
  • Economics of imperfect competition
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What is perfect competition?

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1. Many buyers and sellers (firms act as price takers)

2. Each product makes a similar product (homogenous products)

3. Perfect information 

4. Free entry and exit

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What is market power?

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Ability to influence prices, setting them above cost (specifically above incremental or marginal cost)

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How do firms acquire, maintain market power?

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I: legal protection,

Example: Xerox develops, patents plain-paper photocopying
technology, then raises prices

II: firm strategy,

Example: a cable company introduces aggressive digital TV package: free recover box, free internet, 40% discount on telephone charges

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TESTE DEIN WISSEN

What are the implications of market power?

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• Higher prices imply transfer from consumers to firms — usually not desirable for regulator
• Allocative inefficiency: high airfares, for example, imply potential fliers refrain from buying ticket even thought there are empty seats
• Productive inefficiency: less competitive markets imply fewer incentives to be cost efficient, to innovate

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TESTE DEIN WISSEN

What companies are important for firm regulation and what does the regulator mainly looks at?

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firm has monopoly or near-monopoly power; its actions (e.g., prices) are directly under regulator’s oversight

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Antitrust policy (or competition policy)

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TESTE DEIN WISSEN

broader field; prevent firms from taking actions that increase market power.

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industrial policy:

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support specific firms or industries, namely with respect to foreign firms
• Generally disliked by economists (government picking winners among competitors)

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What are the main points of the Sherman Act?

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TESTE DEIN WISSEN

1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. (makes certain conduct illegal)
2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. (makes certain outcomes illegal)

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TESTE DEIN WISSEN

What are the main points stated in the Structure-Conduct-Performance (SCP) theory?

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TESTE DEIN WISSEN
  • Bigness is bad in itself
  • Size is self-perpetuating and bad for consumers
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TESTE DEIN WISSEN

What is the definition of an industry?

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TESTE DEIN WISSEN

Particular form or branch of economic or commercial activity. 

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Beispielhafte Karteikarten für deinen inter-firm relations Kurs an der Copenhagen Business School - von Kommilitonen auf StudySmarter erstellt!

Q:

What are the main questions regarding the organisation of an industry?

A:
  • How an industry works?
  • What and how much is produced?
  • Who produces and who buys?
  • How are production and consumption allocated?
Q:

What is the difference between Industrial Organization and microeconomics?

A:
  • Focus on the organisation of specific industries
  • Focus on firms' strategies that are characteristic of market interaction: price competition, product positioning, advertising, research and development
  • Focus on oligopoly, that is, competition between few firms
  • Economics of imperfect competition
Q:

What is perfect competition?

A:

1. Many buyers and sellers (firms act as price takers)

2. Each product makes a similar product (homogenous products)

3. Perfect information 

4. Free entry and exit

Q:

What is market power?

A:

Ability to influence prices, setting them above cost (specifically above incremental or marginal cost)

Q:

How do firms acquire, maintain market power?

A:

I: legal protection,

Example: Xerox develops, patents plain-paper photocopying
technology, then raises prices

II: firm strategy,

Example: a cable company introduces aggressive digital TV package: free recover box, free internet, 40% discount on telephone charges

Mehr Karteikarten anzeigen
Q:

What are the implications of market power?

A:

• Higher prices imply transfer from consumers to firms — usually not desirable for regulator
• Allocative inefficiency: high airfares, for example, imply potential fliers refrain from buying ticket even thought there are empty seats
• Productive inefficiency: less competitive markets imply fewer incentives to be cost efficient, to innovate

Q:

What companies are important for firm regulation and what does the regulator mainly looks at?

A:

firm has monopoly or near-monopoly power; its actions (e.g., prices) are directly under regulator’s oversight

Q:

Antitrust policy (or competition policy)

A:

broader field; prevent firms from taking actions that increase market power.

Q:

industrial policy:

A:

support specific firms or industries, namely with respect to foreign firms
• Generally disliked by economists (government picking winners among competitors)

Q:

What are the main points of the Sherman Act?

A:

1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. (makes certain conduct illegal)
2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. (makes certain outcomes illegal)

Q:

What are the main points stated in the Structure-Conduct-Performance (SCP) theory?

A:
  • Bigness is bad in itself
  • Size is self-perpetuating and bad for consumers
Q:

What is the definition of an industry?

A:

Particular form or branch of economic or commercial activity. 

inter-firm relations

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