Economics

Study Notes

Monopoly and Anti-Competitive Behaviour - Key Definitions

Level:
A Level
Board:
AQA, Edexcel, OCR, IB

What is meant by anti-competitive behaviour?

Here are some key concepts defined on the topic of monopoly power and forms of anti competitive behaviour

Anti-competitive behaviour

Strategies designed to limit the degree of competition inside a market and reinforce the monopoly power of established businesses

Collusion

Collusion takes place when rival companies cooperate for their mutual benefit. When two or more parties act together to influence production and/or price levels, thus preventing fair competition. Common in an oligopoly / duopoly

Complex monopoly

A complex monopoly exists if at least one quarter (25%) of the market is in the hands of one or a group of suppliers who, deliberately or not, act in a way designed to reduce competitive pressures within a market

Horizontal collusion

Where there is agreement between firms at the same stage of the production process to charge prices above the competitive level

Predatory pricing

Setting an artificially low price for a product in order to drive away competition - deemed to be illegal by the UK and European competition authorities

Procurement collusion

Where companies illegally bid for large contracts by rigging bids to decide which one of them gets the contract in advance.

Rent seeking behaviour

Behaviour by producers in a market that improves the welfare of one but at the expense of another. A feature of monopoly and oligopoly

Tacit collusion

Where firms undertake actions that are likely to minimize a competitive response, e.g. avoiding price cutting or not attacking each other's market. Tacit collusions is when firms co-operate but not formally, e.g. price leadership, or quiet or implied co-operation, secret, unspoken cooperation

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