Question

Harvard Business School started using case studiesdescriptions of strategic problems encountered at real companies-in courses in 1912. Today, Harvard Business Publishing (HBP) sells its case studies to about 4,000 colleges worldwide. HBP is the sole publisher of Harvard Business School's case studies. What criteria would you use to determine whether HBP has a monopoly on the sale of business case studies to be used in college courses?

Short answer

The criteria that could be used to check if HBP has a monopoly would include determining if HBP is the single seller, if the business case studies they sell are unique and without close substitutes, if there are high barriers preventing other potential competitors from entering the market, and whether HBP has the power to set prices without considering competition.

Step-by-step solution

Single Seller

One main criterion for a monopoly is that the entity should be the single seller in the market. In this case, to determine whether HBP has a monopoly, it should be ascertained first if HBP is the only seller of business case studies for use in college courses. The exercise mentions that HBP sells to about 4,000 colleges, but it does not specify that it is the only entity doing so.

Unique Product

Monopolies often involve exclusive control of a unique product. Here, it would need to be determined if the case studies that HBP sells are unique and have no close substitutes. Given the statement that HBP is the sole publisher of Harvard Business School's case studies, one can argue that their product is unique.

Barriers to Entry

In a monopoly, there are high entry barriers that prevent other potential competitors from entering the market. In this scenario, the query would be if there are high barriers that prevent other publishers from publishing and selling similar business case studies. Factors could include access to the studies, copyright laws, and the reputation and credibility of Harvard Business School.

Price Maker

Lastly, in a monopoly, the monopolist is a 'price maker', meaning they can dictate pricing due to the lack of competition. It would be necessary to establish if HBP is able to set prices for its case studies without considering the competition.

Key concepts

Market Structure

Understanding the market structure is fundamental in assessing competition and the potential for monopoly in a given industry. Market structure refers to the characteristics and dynamics of a market, including the number of firms, the nature of products, and the level of competition. There are several types of market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly.

A monopoly market structure features a single seller offering a unique product or service with no close substitutes. This enables the monopolist to exert significant control over the market, particularly in terms of pricing and supply. The case in point with Harvard Business Publishing illustrates a unique market where a single entity, HBP, sells Harvard Business School's case studies. In assessing whether this constitutes a monopoly, one must analyze not just the presence of other sellers, but also the distinctiveness of the product offered and the ease with which new competitors could enter the market.

Single Seller Criterion

The single seller criterion is a key component of a monopoly. To be considered a monopoly, a market must be dominated by one firm that is the sole provider of a particular product or service. This firm, the monopolist, usually has no significant competition.

In the context of Harvard Business Publishing, this would necessitate confirming if HBP is indeed the exclusive seller of Harvard case studies to colleges. If no other publisher has access to Harvard's content or the right to distribute it, HBP could be fulfilling the single seller criterion. However, merely selling to a large number of colleges does not alone signify a monopoly unless it is established that HBP is the only source of these specific educational materials.

Barriers to Entry in Market

A hallmark of a monopoly is the existence of significant barriers to entry that prevent or discourage new competitors from entering the market. These barriers can be legal, technological, structural, or related to resource control.

For instance, HBP's possible monopoly on Harvard case studies could stem from exclusive rights through copyright laws, which would be a legal barrier to entry. Access to Harvard's extensive library of case studies and their esteemed reputation could constitute structural and resource-based barriers. Potential competitors may find it extremely challenging to replicate or obtain the rights to similar materials, solidifying HBP's dominant market position if other conditions of a monopoly are met.

Price Maker Characteristic

Another defining feature of a monopoly is the price maker characteristic. A price maker holds the power to set prices for their goods or services without having to take competitors' prices into account, as competition is absent or minimal.

To evaluate this in regards to HBP, one would need to investigate their pricing strategy. If HBP has the autonomy to dictate the prices of their case studies irrespective of market forces due to a lack of viable alternative products, then this would strengthen the argument that they have a monopoly. Essentially, if HBP can charge higher prices because schools have few if any, alternatives for similar quality case studies, it suggests they are operating as a price maker.