Using a Leisure Market of Your Choice

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Using a leisure market of your choice, discuss the extent to which it may be considered to be an oligopoly. An oligopoly is a market that is dominated by a few firms who have a high concentration ratio. Oligopolies frequently maintain their positon of dominance in a market because it is too costly for potential firms to enter the market. This is called barrier to entry, and due to this they can earn supernormal profits (see figure) as they can protect themselves from competition in the long run. For the cinema market building something which can seat enough people with the right equipment (e.g. huge high definition screen with state of the art projectors) can be hard to create, due to high set up costs. Furthermore there is more to do, for example gain the rights to shoe new films, which can be very expensive unless you benefit from economies of scale. A natural barrier to entry is the exploitation of economies of scale, where the big firms in the business, in this case Vue, Cineworld and Odeon are using their economies of scale to deter any new entrant away. The top three firms have a relationship and power to obtain the viewing rights to screen 2”first-run” films and to do so at a lower price. So more screens allow for more showing times reducing the average cost. There are also financial and risk bearing economies of scale due to the availability o multiplexes, and the ability to bear and manage commercial risks more effectively than smaller independent cinemas, or small chains. These all combine to create a competitive advantage against small firms and being able to win and maintain market share. Price discrimination also shows signs of oligopolistic firm , as prices are set for different genders, age, time, season, due to lack of competition and choice. The firm is then able to charge a higher price to the group with more price inelastic demand and lower

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