What happens when prices are high and barriers to entry are not?

http://www.marketwatch.com/story/cvs-takes-on-mylans-epipen-with-much-cheaper-version-of-an-alternative-2017-01-12

What happens to price when barriers to entry exist?

http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-chairs/

Why is EpiPen expensive?

This opinion in the WSJ pinpoints well the reason that Mylan has been increasing the price of its EpiPen: :the steady Mylan rise is hard to read as anything other than inevitable when a billion-dollar market is cornered by one supplier."

The writer also questions the wisdom of Hillary Clinton's claim that "the EpiPen price hikes show the need for price controls" and her proposal to "require drug makers to 'prove that any [increases in price] are linked to additional patient benefits and better value.'” Should we require Nike to to prove that any increase in price are linked to additional benefits and better value when they sell running shoes?

Prices, total revenue, and market power

Drugmakers' Pricing Power Remains Strong  by: Joseph Walker Jul 15, 2016 Click here to view the full article on WSJ.com TOPICS: Pricing SUMMARY: Firms' ability to raise drug prices is firmly intact despite pushback from health insurers and scrutiny by U.S. lawmakers. More than two-thirds of the 20 largest pharmaceutical companies said price increases boosted sales of their biggest products in the first quarter. CLASSROOM APPLICATION: The article informs students about the difference between list prices and prices consumers actually pay. With regard to pharmaceutical pricing, one point is that negotiated prices may not be increasing at the same rate as list prices. QUESTIONS:  1. (Advanced) Critically evaluate the statement, "More than two-thirds of the 20 largest pharmaceutical companies said price increases boosted sales of some or most of their biggest products." 2. (Advanced) What is the meaning of the following statement? "Drugmakers' pricing power in the U.S. isn't absolute." 3. (Introductory) Why have shares of many drugmakers slumped this year? 4. (Introductory) Why is it difficult to accurately track pharmaceutical prices? Reviewed By: James Dearden, Lehigh University

Is GM trying to restrict entry?

http://www.bloomberg.com/news/articles/2016-02-24/tesla-battles-general-motors-over-right-to-sell-cars-in-indiana

One less barrier to entry

Anti-Licensing Movement Scores a Victory
by: Eric Morath
Nov 14, 2015
Click here to view the full article on WSJ.com

TOPICS: International Trade, Regulation

SUMMARY: Fitness trainers in the nation's capital city, led by a push from CrossFit, look set to pull off a feat that has eluded the White House and a number of libertarian groups: stopping the spread of occupational licenses.

CLASSROOM APPLICATION: Students can examine the effect of licensing on barriers to entry and wages in occupations. They can also evaluate the reasons why workers in licensed occupations support licensing and discuss the potential benefits of licensing.

QUESTIONS: 
1. (Introductory) What is the effect of occupational licensing on entry into an occupation?

2. (Advanced) Is occupational licensing equivalent to creating a professional monopoly?

3. (Advanced) What are the advantages and disadvantages of occupational licensing? What criterion and methodology would an economist use to determine whether a profession should be licensed?

Reviewed By: James Dearden, Lehigh University

Barriers to entry in the Internet Economy

Facebook, Amazon and Other Tech Giants Tighten Grip on Internet Economy 
by: Don Clark and Robert McMillan
Nov 06, 2015
Click here to view the full article on WSJ.com

TOPICS: Internet

SUMMARY: Computing hardware has long served as the critical backbone of business operations. Today, the Internet economy is powered by an infrastructure that has become virtual, and is controlled by a small handful of tech giants.

CLASSROOM APPLICATION: Students can evaluate the effect of economies of scale and network externalities (which are not mentioned in the article) on barriers to entry and ultimately the market power of the noted tech companies.

QUESTIONS: 
1. (Introductory) Evaluate this statement in terms of economies of scale and barriers to entry into the relevant industries: "All of these companies are operating in industries where scale is rewarded and where there is a very high level of capital intensity required to even hope to compete," said Karl Keirstead a senior analyst with Deutsche Bank Securities.

2. (Advanced) Evaluate this statement in terms of the market power of tech firms: "These companies are delivering online search, messaging, advertising, applications, computing and storage on demand-which has positioned them not only to empower business but to extract extraordinary value as it grows." Interpret "positioned them" in terms of economies of scale and barriers to entry.

3. (Advanced) Define "natural monopoly" and "network externalities." Do economies of scale and network externalities in the noted tech industries drive barriers to entry and ultimately the market power of the established players in these industries?

Reviewed By: James Dearden, Lehigh University

A good example of a near monopoly (80% market share)

Luxottica produces about 80% of the frames for sun- and eye glasses. Moreover, it has achieved this dominant position with little help from the government, as far as I can tell. Here is an excellent account of the predictable effects: http://www.forbes.com/sites/anaswanson/2014/09/10/meet-the-four-eyed-eight-tentacled-monopoly-that-is-making-your-glasses-so-expensive/.

The California electricity crisis

Here is a a nice description of the California electricity crisis: https://en.wikipedia.org/wiki/California_electricity_crisis. Here are some money quotes.

"California had a shortage of electricity supply caused by market manipulations, illegal shutdowns of pipelines by the Texas energy consortium Enron, and capped retail electricity prices." (Highlight added from emphasis.)

"the Death Star group of scams played on the market rules which required the state to pay 'congestion fees' to alleviate congestion on major power lines". Who set and enforced the market rules? Answer: a regulatory board in CA.

Two older posts on monopoly

http://edlikeseconomics.blogspot.com/search/label/Monopoly

Monopolies and Oligopolies are Bad!

So says Robert Reich: http://www.huffingtonpost.com/robert-reich/the-rigging-of-the-americ_b_8447428.html

A monopoly for pot?

If a market for marijuana is good, why would competition be better than monopoly?
http://www.politico.com/magazine/story/2015/11/marijuana-legalization-monopoloy-213312