Leisure market structures

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Leisure market structures

  1. 1. Leisure Markets
  2. 2. There are four leisure markets which need to be considered in F583  Spectator sports (which usually means football)  Holidays and travel (a very broad category)  Cinemas  Broadcasting
  3. 3. The main skills needed in the examination for each of these will be:  To be able to recall some key data and recent trends (L2)  To place them into a market structure using the characteristics (L3)  Use the market structure to explain their behaviour and efficiency (L3)  Evaluation the market structure (L4)  Assess the level of contestability (L4)
  4. 4. Market structures recap  Perfect competition characteristics  Perfect knowledge and mobility  No barriers to entry  Homogenous products  Must accept market price for all goods  Perfect competition implications  Horizontal AR/MR curve (all goods sold at the same price)  Productively and allocatively efficient  Unlikely to be dynamically efficient  Cannot make abnormal profits
  5. 5. Market structures recap  Monopolistic Competition characteristics  Differentiated goods  Low barriers to entry  Many, small firms  Limited price setting power  Monopolistic Competition implications  Gently sloped AR/MR curves (elastic because of alternatives)  Profits in SR only  Not efficient
  6. 6. Market Structures recap  Oligopoly characteristics  Few firms  Interdependence (what one does affects the others)  May be competitive or collusive  Non-price competition is dominant  Barriers to entry (often loyalty)  Oligopoly implications  Profits depend on level of competition  Unlikely to be efficient  Potential for dynamic efficiency  Price stability
  7. 7. Market Structures recap  Monopoly characteristics  One firm (or one with more than 25%)  High barriers to entry (often legal)  Significant price setting power (may only be limited by government)  Monopoly implications  Depend on attitude of firm  May or may not be dynamically efficient  May or may not exploit the consumers  Likely to benefit from economies of scale (natural monopoly)  Profitable in short and long run
  8. 8. Placing the Leisure Markets  The importance of perspective  What are we considering to be the market?  Spectator Sports – All football teams (including local ones) or only the Premiership? Are we considering all Premiership teams or only those which are comparable?  Holidays and Travel – so many options • Hotels – Chains? All-inclusive? Local? • Flights – Airlines generally? Specific routes/airports? Business/Pleasure? • Holidays – Independently booked? Travel agents? Package holidays?  Cinemas – all cinemas? In a particular location?  Broadcasting – All freeview channels? Sky? Online? Are we considering mass market channels only?
  9. 9. Sports Travel Cinema Broadcasting All cinemas within a city All channels including the small, random ones on Freeview/Sky Travel agents Monopolistic Competition All sports teams including local and minor leagues Airline industry generally Hotels generally Package Holidays (Thomas Cook, TUI own more than 40%) Oligopoly Premiership, especially the “big brand” Large, out-of teams (Man U, town cinemas Flights on a Chelsea, (multiplex) particular route Arsenal, Man C, Liverpool) Large, chain hotels within a city Large massmarket channels (BBC1, BBC2, Channel 4, ITV, Channel 5) Service providers (BBC, ITV, Channel 4, Sky)
  10. 10. Trends and other notable items  Sports  Lack of focus on profits (almost like a hobby), not like a ‘normal’ business  Increasing ticket prices  Massive brand loyalty  Holidays  Growth of internet making things more competitive  Increase in holidays to long-haul destinations  More holidays than ever before but this also means growth in ‘staycations’ and package holidays  Cinemas  Move to multiplexes & backlash against multiplexes  Introduction of new differentiators e.g. alcohol, 3D, IMAX  Much smaller audiences than historic amounts but a revival in last few years. Sustainable?  Broadcasting  Much more competitive than it used to be  Easy technology and ability to broadcast online at low cost  Impact of SMART TV, iPLayer, TiVO, mobile?
  11. 11. Homework  From the January 2012 Paper 3a) Analyse, using diagrams, the difference between the short run and long run equilibrium of a firm in monopolistic competition. (15) 3b) Discuss, using a leisure industry of your choice, the extent to which it is monopololistically competitive. (20)

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