Examples of monopoly power and price discrimination

Example of global monopoly power

A monopoly is one firm which produces a certain unique good in a market. This firm supplies 100% of the market. Global monopolies are monopolies can operate in more than one country. They enjoy monopoly power on a bigger scale. An example of this is Microsoft.

Microsoft commands an almost unbridled monopoly power because of its extensive customer and developer base in the market for operating systems and other software. They are a huge company operating around the world and very few companies can compete with Microsoft’s technology due to barriers to entry.

Microsoft’s share of the market for Intel PC systems is extremely large and stable and is protected by high barriers to entry. Due to this, consumers lack a commercially viable alternative to windows. Microsoft’s share of the worldwide market is increasing every year and they enjoy monopoly power such as huge profit for updating services to make their products efficient and cheaper. They offer a lot of services such as word to windows media player and because of their worldwide status, supply for cheaper.

Example of Price discrimination

Price discrimination is when a firm sells the same product or service for a different price to different consumers.

Early bird discounts is an example of price discrimination. Airlines tend to do this as customers who commit themselves to a flight early will tend to get a cheaper flight. By booking early you will find yourself paying less for the same flight than if you were to book it a few days the flight. People who book flights closer to the actual flight date will pay extra for the flight because their demand is inelastic. Charging different prices for the same type of flight to the same destination is an example of price discrimination.

Another example of early bird discounts is at the cinema where they will charge less to watch a film if you choose to see it before midday. If you choose to see a certain film before 12:00pm then it will cost you less money than if you wanted to watch the same film in the evening. Charging different prices to watch the same film but at different times is another example of price discrimination.