Monopoly situation exists when there is a single supplier of a unique product that has no close substitute. For example, Sky had a monopoly over the live football coverage. According to the 1998 Competition Act, abuse of dominant power means that a firm can 'behave independently of competitive pressures'. (Source: economicshelp.org) P
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Monopoly (Source: economicshelp.org) Monopoly power that exists in football is the firm gets to set up the price as they are price makers. From Figure 2 below, the monopolist can charge a higher price (P1) than in a more competitive market (at P) due to lack of competition. For example, Sky sets up the price to the point where it maximises its profits. In 1997, Sky became successful as the price paid by the viewers and advertisers are highly profitable. This shows that the viewers and advertisers were willing to take the price of that monopoly had charge them.
Thus, this power could be reduced by regulating the behaviour of the monopolies. For example, European Commission sets up a public policy to control the prices broadcasters charge viewers. Sky must get an approval from European Commission if they want to charge their coverage at higher prices.
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Demand curve for pay broadcasters’ emergence (Source: economicsonline.co.uk)
The impact of the pay broadcasters’ emergence over the past 20 years on football fans and viewers is that they will have less choice to substitute the broadcaster as the product is unique and completely controlled by Sky. Based on Figure 3 above, the demand curve for the pay broadcasters’ emergence is inelastic. With only Sky being the only broadcaster in the market place, the football fans and viewers face a lack of options. The impact of the pay broadcasters’ emergence over the past 20 years on football fans and viewers is that they will suffer from higher prices. Sky exploits its high position and charge higher prices because the football fans and viewers do not have any alternative. Based on Figure 3 above, as the price of the packages increases massively from P1 to P2, the quantity demanded for the packages decreases just a little from Q1 to Q2. This is because the pay broadcasters’ emergence are insensitive to a change in price.
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MR DD=AR …show more content…
Monopoly (Source: economicshelp.org) Monopoly power that exists in football is the firm gets to set up the price as they are price makers. From Figure 2 below, the monopolist can charge a higher price (P1) than in a more competitive market (at P) due to lack of competition. For example, Sky sets up the price to the point where it maximises its profits. In 1997, Sky became successful as the price paid by the viewers and advertisers are highly profitable. This shows that the viewers and advertisers were willing to take the price of that monopoly had charge them.
Thus, this power could be reduced by regulating the behaviour of the monopolies. For example, European Commission sets up a public policy to control the prices broadcasters charge viewers. Sky must get an approval from European Commission if they want to charge their coverage at higher prices.
Cost and …show more content…
Demand curve for pay broadcasters’ emergence (Source: economicsonline.co.uk)
The impact of the pay broadcasters’ emergence over the past 20 years on football fans and viewers is that they will have less choice to substitute the broadcaster as the product is unique and completely controlled by Sky. Based on Figure 3 above, the demand curve for the pay broadcasters’ emergence is inelastic. With only Sky being the only broadcaster in the market place, the football fans and viewers face a lack of options. The impact of the pay broadcasters’ emergence over the past 20 years on football fans and viewers is that they will suffer from higher prices. Sky exploits its high position and charge higher prices because the football fans and viewers do not have any alternative. Based on Figure 3 above, as the price of the packages increases massively from P1 to P2, the quantity demanded for the packages decreases just a little from Q1 to Q2. This is because the pay broadcasters’ emergence are insensitive to a change in price.