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. 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. 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. 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. 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. 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. 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. 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. 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. 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)