Competition Policy (Quizlet Activity)

Here is a quizlet revision activity covering aspects of competition policy

Here are some key competition policy terms to learn:

• Abnormal profit: Profit in excess of normal profit - also known as supernormal profit or monopoly profit
• Anti-competitive behaviour: Strategies to limit the degree of competition inside a market and reinforce the monopoly power of established businesses
• Collusion: When rival companies cooperate for their mutual benefit. Common in an oligopoly / duopoly
• Competition & Markets Authority: Body that tackles price fixing, monopolies and unfair mergers
• Deregulation: Opening up of markets by reducing barriers to entry. The aim is to increase supply and bring lower prices for consumers
• Herfindahl Index: A measure of market concentration. The index is calculated by squaring the % market share of each firm in the market and summing these numbers
• Hit and run competition: When a business enters an industry to take advantage of temporarily high (supernormal) market profits.
• Horizontal collusion: Where there is agreement between firms at the same stage of the production process to charge prices above the competitive level
• Price capping: A legally-imposed limit on the price charged for a product
• Privatisation: The sale of state-owned companies to the private sector, normally through a stock market listing. The opposite of nationalization
• Regulatory capture: When industries under the control of a regulatory body appear to operate in favour of the vested interest of monopoly producers rather than consumers
• Tacit collusion: When firms co-operate but not formally, e.g. price leadership, secret, unspoken cooperation
• X-inefficiency: A lack of real competition may give a monopolist less of an incentive to invest in new ideas or consider consumer welfare
• Zero sum game: An economic transaction in which whatever is gained by one party must be lost by the other.