Dominant Position of a Company

According to the European arguing case law, a ascendent position is defined as the former of a substantial to behave to an appreciable extent singly of its competitors, customers and consumers. It is patent that a hard or several(prenominal) firms which hold a ascendant position open fire posit harm, the amount of production, supply and this is because these firms disregard meet individually of their competitors and customers.As a result, dominating position can lead to the commercialise proponent and in this situation a firm or several firms have an ability to individually invite a bombastic shape on the price and total quantity produced which could result to the food market failure. tho does this definition make an economic sense and how it should be interpreted in monopoly and oligopoly? Firstly, we subscribe to to get a line exactly the actual meaning of a overriding position.It is a situation when a firm has an ability to behave independently of its comp etitors, customers and ultimately the final consumer. A well pick outn guinea pig of noncompetitive dominance is Microsofts market in PC operating systems. In monopoly many members in a market can gain market indicator allowing them to stop other important gains from trades and this can make the allotment of recourses inefficient due to imperfect competition. As going back to my example, Microsoft illegally used its market power by bundling its web web browser with its operating system.In economics, market power is the ability of a firm to independently determine the market price and the production of a good or a service, of course, in perfectly competitive markets market power vanishes. From this example we actually see that Microsoft has an ability to make a big warp on the price or other outcomes in the market by using its controlling position because that kind of a firm can put forward price, outcomes without worrying of losing its customers.On the other hand, not onl y one firm can hold a dominant position, alone in like manner a dominant position can be held among several firms and this is called oligopolistic dominance. For example in 2008 Verizon, AT&T, Sprint, Nextel and T-Mobile together controlled approximately 89 % of the United States cellular shout out market. In this situation well-nightimes firms can decide to make somewhat secret agreements in order, for example, to raise prices of cellular phones leading to the profit maximization, well-educated that they still are not going to lose their costumers.Of course, there is intellection that oligopoly is better than monopoly, because oligopolistic dominance (several firms who have a dominant position) could dish up to poise smooth markets, for example dominant firms could set some kind of prices which could help other producers to survive in the veritable market and this is called a price leadership, however the welfare of economics in oligopoly is not easy to decompose and to determine if it is going to have a positive reaction.Furthermore, now we know that the definition of dominant position makes an economic sense, because when a firm has a power to behave independently and can make a big lick on the welfare of the economics (prices, total quantity produced, talent in allocating the resources), market power and later market failure could occur. We also know that a market failure is a situation when the allocation of recourses is inefficient due to imperfect competition when not all sellers and buyers can be satisfied.In order to prevent market failure, each government imposes some policies such as subsidies, taxes, minimum wage, some price controls, however sometimes happens that these policies also create inefficiency in allocating the recourses and it is called government failure. Going back to the reliable topic, dominant position is not an exception.According to the European competition case law, dominant positions are not forbidden but in order for firms not to abuse that position they have a special responsibility dominant firms must not allow their strategic decisions to make a ostracize influence on competition in the market, in other words, dominant firms cannot intentionally prevent or eliminate competition. Moreover, in order to determine the definition of dominant position in monopoly, at first we need to understand the basic aspects of it.Monopoly is a situation when a certain promoter is the only one who supplies a particular good, of course, it is obvious that this market has a lack of economic competition. In monopoly a company has a oftentimes bigger profit than it could expect in competitive market, because that only firm regulates all the prices and services for that certain good. As a result, it can raise the price and maximize its profit without worrying of losing its customers. So, the dominant position in monopoly is a market with a single agent which has a power to endure independently and has an ab ility to make a big influence on the prices and production.Finally, to do the resembling in oligopoly we also need to understand the basic aspects of it. Oligopoly is the market share of several firms which together make a big influence to the price or other outcomes of a certain market, however the difference between monopoly and oligopoly is that in oligopoly firms do not operate independently, because then they could lose some of their customers to their competitors. That is why several dominant firms eer try to cooperate together and sometimes they even make some secret agreements in order to maximize their profits.So, the dominant position in oligopoly is the market share of several dominant firms who have an ability to make big influence on the prices and production. To sum up, we actually see that a dominant position can be defined variously in different areas but still all definitions will have the same meaning a dominant position creates a market power which evidence to t he inefficiency of allocating the resources in economic markets and sometimes leading to the market failure, but in some cases dominant position is the key of stabilizing unstable markets.