Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

How the Limit-Pricing Model Fit within the Harvard Approach to Industrial Economics - Assignment Example

Comments (0) Cite this document
The author identifies the barriers to the market entry, how the limit-pricing model fits within the Harvard approach to industrial economics, and how economists from the Chicago school might differ in their assessment of the damage caused by these barriers…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.8% of users find it useful
How the Limit-Pricing Model Fit within the Harvard Approach to Industrial Economics
Read TextPreview

Extract of sample "How the Limit-Pricing Model Fit within the Harvard Approach to Industrial Economics"

Download file to see previous pages Among these technological causes, one is the diminishing cost structure of the monopolist firm. There are some internal and external economies and diseconomies of scale. If the economies of scale dominate over the diseconomies of scale the firm faces diminishing cost. That's why the cost declines with the expansion of the firm. Higher the amount of production lower would be the average and marginal cost and hence higher would be the capability to charge the lower price. That can be shown with the help of the following diagram.
The above case is called the phenomenon of natural monopoly; the new firm's entry gets restricted automatically because of the technological nature of the existing firm. The new firm would not be able to compete with the existing firm. (Kutsoyiannis 1994)
2. There are many barriers that are responsible for the monopoly power that a firm may enjoy. A high level of fixed cost is also a cause behind the emergence of monopoly power. If in an industry, the starting of a new venture is subject to high establishment cost or resource cost it would be difficult for the new entrants to start a new venture in the market. That also contributes to the monopoly power of the firm or firms as the scope of new entry becomes narrower due to the high time and cost required for starting production in the market. (Hoag 2006)
3. Another major cause behind the emergence of monopoly power is the legal barriers to entry. In this situation, the monopolist is protected by the legal system of the country from competition from new firms. The state enforces some laws that would enable a single company to sell any particular good or service. The best example is the case of USPS for delivering the first class mail. No other company is entitled to the right to sale the same commodity. That's why USPS enjoys the monopoly power in the market. Monopoly power is protected by federal law. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“How the Limit-Pricing Model Fit within the Harvard Approach to Assignment”, n.d.)
How the Limit-Pricing Model Fit within the Harvard Approach to Assignment. Retrieved from
(How the Limit-Pricing Model Fit Within the Harvard Approach to Assignment)
How the Limit-Pricing Model Fit Within the Harvard Approach to Assignment.
“How the Limit-Pricing Model Fit Within the Harvard Approach to Assignment”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF How the Limit-Pricing Model Fit within the Harvard Approach to Industrial Economics

Capital asset pricing model

...? and Section # of Capital Asset Pricing Model is a tool extensively used to value assets in the financial sector. It has been extensively used in calculating the required return of investment products. The capital asset pricing model was introduced in the 1960s by William Sharpe; since then it has been considered as the cornerstone of predicting the required return on an investment. Required Return: Risk free rate + ? (Average Market Return –Risk free rate) Where ? is the beta value of the financial asset The basic assumptions of this model pose as disadvantageous for this model to be considered as a perfect representative of required return calculation. One of its basic assumptions is that investors are holding diversified portfolios...
1 Pages(250 words)Essay

Capital Asset Pricing Model

The average cost of capital in the S&P 500 is 10.2 percent. It can be said that the cost of capital of Nvidia is almost on par with S&P 500 companies. It is pertinent to note that risk free rate varies time to time depending upon the yield of government Treasury bill. Usually, it is found to give 3% in normal conditions and based on this treasury rate, the cost of equity can also be calculated using the same formula
Rj = RF + βj [RM - RF]
It is assumed that difference between the expectation on rate of return for market portfolio and available risk-free rate of return, [RM - RF] factor is 7.0
Then, Rj, the cost of equity = 3+ 1.54 [7]
5 Pages(1250 words)Research Paper

Capital asset pricing model

...? CAPM by + A) Discuss the main theoretical limitations of the Capital asset pricing model. Capital asset pricing model assumptions are unrealistic and deviate far from the real life happenings. The model assumes that short-term government securities are risk free. It is difficult to find risk free securities. Government securities are unlikely to be defaulted but factors such as inflation creates uncertainty on the real rate of return. The model also assumes that the lending rate and the borrowing rate are equal. In practice, these two rates differ and therefore, the model will not hold in a real life scenario. The model also assumes that there is no transaction cost, taxes or holding period of the securities. However, these costs exist...
4 Pages(1000 words)Essay

Capital Asset Pricing Model

...?Discuss the main theoretical limitations of the CAPM. The Capital Asset Pricing Model (CAPM) is a model that shows the relationship between risk of an asset and its expected return. Its major limitations stem from its methodological assumptions. One of the assumptions it makes relates to the relative volatility of investment. The CAPM model therefore relies on the ability to measure market volatility as a whole. With several possible investments available in the market, the model assumes that one can accurately assess the volatility of each of these investments. This is impossible. Usually, the overall volatility of the market is measures through proxies when implementing this model, for instance, the use of FTSE index. Such proxies...
4 Pages(1000 words)Assignment

Capital Asset Pricing Model

In most business, risks are often associated with each venture that entities partake. Logically, every endeavour can be affected by several stressors and will result in unsure forecasts. Indeed, firms are unaware of the exact benefits that an investment despite the forecasts provided by financial analysts. In determining the return that investments will likely provide, organisations make use of cash flows. Comparing the cash the flowed out from the investment to the cash that flowed in because of the investment appears to be a near accurate approach that results in a better understanding of investment returns. Basically, there are certain tools and mechanisms used by firms to justify the use of cash flows. In particular, discounte...
10 Pages(2500 words)Research Paper

Industrial Economics

...) An industry analysis consists of three most key fundamentals: the causal forces at work in the industry; the on the whole magnetism of the industry; and the critical factors that establish a company's success within the industry. In 1980, Michael E. Porter developed a leading model for analyzing the arrangement of industries. A complete industry analysis necessitates a business owner to make an objective examination of the underlying forces, attractiveness, and success factors that establish the composition of the industry. Considering and accepting the company's working environment in this manner can assist the business owner to devise an effectual and successful strategy, pose the company for success, and employ the limited resources...
6 Pages(1500 words)Essay

Industrial Economics

In fact in many markets there exist some dominating firms which play the roles of market leader. These large firms in order to maintain their market share create some barriers for new firm to enter into the market. (Baldwin, 1995)
Barriers to entry into a particular industry have immense potential to diminish or entirely prevent the normal mechanism of that industry in attracting new firms towards it. To negatively affect competition in an industry along with the welfare of consumers, it is not always necessary for entry barriers to prevent firms from making their entry into that industry forever. In fact, very often these barriers can create significant effect on the performance of the market only by retarding the arrival of...
10 Pages(2500 words)Essay

Capital Asset Pricing Model

... Line and provides a return greater than that of required to offset the systematic risk (Sharifzadeh, 2010). Not Viable in Reality The argument against CAPM emanates mainly from the pre-suppositions about it. Several of these are removed from reality. While some of them may seem to be plausible, e.g. investors wanting to maintain well-diversified stock portfolios that fairly represent market conditions and to derive the benefits of taking smart risks, the other assumptions are arguable. Real world capital markets are far from being perfect and the price of assets may be incorrect. Following is a list if the pre-suppositions about investors, in the CAPM model. 1. They aim to optimize economic utilities, i.e. the quantity if assets is already...
8 Pages(2000 words)Essay

A Six Stage Model of the Innovation Process

This paper will focus on the relationship and impact and innovation will have on politics. The backbone of the paper will be the strong opinion of Professor Langdon Winner who teaches at the Department of Science and Technology Studies. He has said that “technical things have political qualities” and this paper will base its study on this. “Langdon Winner is a political theorist who focuses on social and political issues that surround modern technological change.” (Brief Biography). When undertaking a serious study of the topic, so many theories and assumptions also begin to emerge that are related to the topic. They include concepts like SCOT, Actor-Network Theory, determinism, closure, and other related f...
9 Pages(2250 words)Case Study

Bullying Within Nursing Workplace

Bullying is basically defined as ‘offensive behavior through vindictive, cruel, malicious, or humiliating attempts to undermine an individual or group of employees’ (ILO, 1998). The bullying in the workplace has widespread ramifications leading to the increased rate of attrition of the employees, low quality of work, creation of poor practice in the professional environment and violation of legal-ethical norms. Bullying in the nursing workplace becomes a highly deplorable act because it directly impacts the well being of the vulnerable third party, the patients. The bullying of nurses comes from various quarters; employers and hospital administration, managers, colleagues, patients, and patients’ families. It is...
8 Pages(2000 words)Research Paper

Capital Asset Pricing Model and Recent Developments

It is the most essential aspect of any venture. The important considerations that finance has within it, is that of profit and loss. The business as a whole or a person as an individual always strives to earn a profit. To earn a profit, one has to undertake uncertainties that are known as risks. Therefore, profit is also known as the reward for incurring risks.
In the present world of today, the capital market has come up as a viable investment opportunity for individuals all across the globe. People invest their hard money only with the expectation to earn profit or return. The stocks of various companies that are traded in the capital market are also known as capital assets. Prior to investing in any of the stock or capital...
7 Pages(1750 words)Assignment

Capital Asset Pricing Model & Arbitrage Pricing Theory Model

... the beta, the CAPM will lose its significance. (Singh 2008) 5.0 Benefits of CAPM and its limitation and benefits of APT AND its limitation The benefit of the Capital Asset Pricing Model is its ease of use and simplicity of approach, a factor that appealed greatly to most stock market analysts and professionals working in the field. Stock market move rather quickly especially during trending markets, and so stock analysts and investment advisers as well as investors themselves preferred a quick way by which to gauge if particular stock has already been overpriced by the market, or is still undervalued. As the weakness of the dividend discount model shows, future dividends are difficult to estimate, and besides it was easier to gauge...
12 Pages(3000 words)Assignment

Approach to Education: Comparison of Philosophies of A S Neill & Paul Hirst

He believed that to impose anything by authority is wrong. The child should not do anything until he comes to an opinion – his own opinion- that it should be done. He states clearly his commitment to freedom of a child: ‘we set out to make a school in which we should allow children to be themselves. In order to do this, we had to renounce all discipline, all directions, all suggestions, all moral training, and all religious instruction. The child should never be forced to learn, Attendance at lessons should be voluntary whatever the age of the child. Only learning that is voluntarily undertaken has any value, and children will know themselves when they are ready to learn. (Summerhill , p.37)

Children will on...
9 Pages(2250 words)Report

Global Employee Information and Consultation: Replicating the European Model

A significant step to enhancing the employees’ right to information and consultation is the establishment of the European Works Council (EWC). The EWC Directive (94/45/EC) aims to improve cooperation in transnational companies and to allow trade unions to influence, at least indirectly, the decision-making of corporations (Lockwood and Williams). It requires community-scale undertakings and community-scale groups of undertaking to create this mechanism for regular consultation of the workforce. A ‘community-scale undertaking’ is one with at least 1,000 employees within the Member States and at least 150 employees in each of at least two Member States (Lewis and Sargeant).

An EWC is a forum that would a...
9 Pages(2250 words)Coursework

Introductory Economics and Finance: Why Governments Regulate Firms and Markets

By government regulation, it is meant by the rules administered by a government or government agency to influence any economic activity which determines the price, types, and standards of products, and most importantly the conditions under which the entry and exit of the firms are possible.

Like death, it is impossible to keep away from regulation in about every aspect of daily life. The business regulation may be classified into two- economic and social (Litan). The economic regulation deals with price controls and the entry limits of the firms into markets. The second type regulation mostly deals with externalities (the outside influences of the company or firm which may or may not be decided by them)

6 Pages(1500 words)Assignment

The Trends in the Steel Industry and How It May Impact Nucor Corporations Strategy

The whole organization at Nucor’s revolves around the laid principles and focus on reinforcing to the extent that the organization is known for its culture and quality. Simultaneous quality checks and adherence are also as important building a strong culture for the organizations.

Nucor Corporation has always tried to challenge itself for further progress and to keep abreast of the industry of steel business.

Let us look at the trends observed in the business of the steel industry. The trend in the steel industry is very dynamic and always impacted by internal and extraneous factors. For almost 50 years the United States of America reigned in the industry of steel production, almost half of the entire p...
8 Pages(2000 words)Case Study

Evaluation of the Role of Human Networks in Knowledge Creation and Knowledge Sharing Within Patni

The extensive literature review has been undertaken to justify the actions of Patni and to appreciate its initiatives that enhance employee participation. The steps taken by this Indian IT giant in institutionalizing organizational learning have been discussed largely from the perspective of human resource management and it has also been discussed as to how knowledge generation takes place within the organization.

This report will aim at critically evaluating the role of human networks in knowledge creation and knowledge sharing within Patni Computer Systems Ltd. (Patni). For this purpose, an extensive literature review will be undertaken and various theories pertaining to human resource management will be made use of....
6 Pages(1500 words)Case Study

What to Consider in Structure-Conduct-Performance Model

The best possible outcome for SA is when it plays L while SS plays U and the best possible outcome for SS is when it plays L, and the other plays U. These outcomes (L, U) and (U, L) are difficult to achieve. This is because these strategies are not dominant for both. There is an incentive for one player to deviate.
If the prices are decided every week then the strategy would change in terms of the components. For the repeated games, the Nash equilibriums of all the sub-games are the same as the equilibrium of each one-shot game. The number of components in the strategy would increase because of the repetition of the game (both would still play L, L) however the pay off associated with the game would be increase by times of th...
6 Pages(1500 words)Essay

How Do Customers Assess Service Quality of Retailing Websites

Given the emergent nature of online commerce, it is a tough task for retailers to develop a website that meets all expectations from consumers. This view is supported by a survey conducted by the UK’s largest e-consultancy Cap Gemini. The survey identified several key disadvantages for online shoppers. Some of these include “’ Availability’, ‘Can’t be in to receive delivery’, ‘Premium charged for delivery’, ‘Can’t see or feel the merchandise’, etc.” (Quader & Quader, 2008) These are not trivial complaints by any means and despite the e-retailing industry setting foot into its third decade in existence, there are no satisfactory solutions found for th...
6 Pages(1500 words)Literature review

Capital Asset Pricing Model

...:// [Accessed November 10, 2010]. Bibliography Fabozzi, F. J. & Et. Al., 2006. Financial Modeling of the Equity Market. John Wiley & Sons, Inc. Fama, E. F. & French, K. R., 1996. Industry Cost of Equity. Journal of Financial Economics 43 (1997) Kurschner, M., 2008. Limitations of the Capital Asset Pricing Model (CAPM). GRIN Verlag, Petkova, R., 2006. Do the Fama–French Factors Proxy for Innovations in Predictive Variables? The Journal of Finance. Ross, S. A. & Et. Al., 2004. Corporate Finance. Tata McGraw-Hill....
12 Pages(3000 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic How the Limit-Pricing Model Fit within the Harvard Approach to Industrial Economics for FREE!

Contact Us