Leisure Industry Competition Essay

1. Discuss using examples from a blank industry of your choice, the limit to which ambition creates skill. There atomic quash 18 many slipway in which a plastered or leisure industry can be considered to be good. First of all they may be productively efficient. This is where they would be run at their lowest average be, squiffying they argon benefiting from all economies of scales and drive no diseconomies of scale. They particularly must avoid any waste of component parts of production. Allocative efficiency exists when the firm is operating where Price is equal to Marginal Cost. When a firm or industry is allocatively efficient this means they ar producing what society wants and allocating resources to make up both railroad siding and quality. This may be in the form of specialisation. If energizing efficiency exists this means that the firm or industry is experiencing abnormal profit. Their decl atomic number 18 oneself must always be to add out bewilder in th e incoming much by investing in research and development, such firms are often benefitting from monopoly power. Pareto efficiency is where production of one secure can enlarge without the production of a nonher decreasing.I believe that join ond competition forget create productive efficiency. This is because if in that location is step-upd competition through an make up in the supply of for example entertainment channels entering the TV publicize industry this leave import in firms having the impose their prices of publicizing slots due to the potential fall in the number of viewers. This go away mean that they are now price takers in the mart and as a result their r as yetue will decrease. As the firms are profit maximisers they will be unsatisfied with their revenue falling and as a result they will direct to reduce their average bell in an cause to maintain their previous profit level. They will reduce their average cost by avoiding any waste of component part s of production in the production of the good/service and in order to do so they will often reduce their output of any tender television programmes as there is a potential that they may be unsuccessful and as a result viewers will often see an increase in the number of repeats of television programmes. They will in addition decrease their output of new programmes in order to stop any potential diseconomies of scale and purify communication in the production of their good/service.Therefore at this indicate I believe that inthe leisure industry firms such as ITV prolong become more productively efficient as a result of change magnitude competition. Some firms also have the ability to meet economies of scale. An example would be SKY who obtained technical economies of scale by the foundation of 3D and HD boxes, and purchasing economies of scale by the purchase of previously unobtainable channels and programmes such as HBI and the FA cup. Attaining these economies of scale redu ced SKYs average cost leading to them world more productively efficient. This further backs up my lay that increased competition does result in greater efficiency. However, it could be argued that this is low-level upon the scale of competition. For example, when Channel 4 and Channel 5 first entered the market this was not the case, meaning efficiency did not increase. However, as these channels have become more well established this is now the case. One could also argue that this is also not the case for the BBC due to the fact that they are funded by the Government and do not compete on price.The BBC is a public monopoly but they are certainly not efficient. The BBC is not stinger costs in order to become more productively efficient the Government is reducing their funding consequently this has created the need for the company to be more productively efficient. They are doing this in a number of ways such as moving production from London to Manchester as it is cheaper and th erefore will reduce their costs. Therefore increased competition is not the factor that is causing the BBC to become more productively efficient Government interference is. This leads me to the conclusion that the greater the number of firms the more likely they are to increase productive efficiency. But increased competition is not the only factor government intervention must also be considered.In the leisure industry there is always a need for Travel Agents to be allocatively efficient, this is because it is vital that they produce what society wants. If it was the case that certain Travel agents were not providing the holidays that get hold ofrs wanted this would simply result in holiday makers going elsewhere. This is particularly the case at present because barriers to entry/exit have decreased meaning new firms are entering the market all of the clip due to improved communication. This has increased competition mainly due to the profit as many travel agents and compariso n websites have set up online to compare the best deals, which increases thepower to the consumer as they are no long-run required to visit the main four travel agents. This has resulted in a greater need for travel agents to avoid mis-allocation of their resources by decreasing the number of planes and destinations. This is because if they do not allocate their holidays to societies needs their Marginal Cost will increase above their price. Therefore increased competition leads to an increase in the need for firms to allocate resources to what society needs and determine that they are change magnitude their quality and output to become allocatively efficient.We have established that increased competition will inevitably result in increased output so far it will also increase external costs. For example in eco tourism, if output increases in visits to the rainforest this will cause a major increase in the number of negative externalities. Therefore in this case it would be benef icial to decrease the output of such visits in order to reduce negative externalities. In fact I would argue that a monopoly supplier of eco tourism holidays would be the most beneficial for the environment as they aptitude produce holidays at the social optimum level. Taking these factors into consideration I potently believe that increased competition will force firms to call back about how they can allocate resources efficiently but sometimes at a social cost.With SKY benefiting from technical economies of scale it could also be argued that by investing in HD and 3D boxes this has also allowed them to become dynamically efficient as their abnormal profits allow them to invest in research and development which allows them to increase output in the future with the alike(p) factors of production inevitably leading to monopoly power. This benefits consumers as they are able to consume greater output in the form of 3D and HD programmes or a wider range of channels in the future w ithout the needed for greater factors of production. However, I could argue that this is not in fact them demonstrating greater efficiency as a result of increased competition but rather creating even more barriers to entry for other firms wishing to compete with them in the broadcasting market.It also could be questioned as to how much of their abnormal profits are actually being invested into research and development as I am aware that the majority of their profits goes to shareholders. Therefore I am light-emitting diode to believe that although theoretically SKYs monopoly power and the lack of competition theyface gives them the fortune to be dynamically efficient in reality it is questionable as to what will drive competition in the future. Although it could in fact be more competition that will drive future efficiency and not the abnormal profits of just a few firms.I strongly believe that increased competition is most likely to result in efficiency in the travel market as t here are little barriers to entry that current travel agents are able to put up in order to stop competition affecting their profits. This is by and large due to the fact that the internet has allowed many new companies to set up online giving consumers the opportunity to compare prices directly therefore increasing the need for travel agents to be allocatively efficient making the statement true. However I accept some may argue that if a firm is being allocatively efficient at a social cost they should not be considered to be allocatively efficient and therefore my judgment could be questioned.On the other hand when firms are not competing on price, like for example the BBC, an increase in competition is not likely to result in them fit more efficient as decreasing their average cost is not likely to be a priority but instead they are more likely to need to increase the quality of their good or service. In theory I believe that the best way to ensure efficiency in the future is to invest in R+D (creating new barriers to entry like SKY) and the way to get firms to do this is increased competition. In reality this may result in negative externalities or potentially abuse of monopoly power and monopolies may often end up being inefficient in the long run.