Seller Concentration

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seller concentration

The topic seller concentrationis discussed in the following articles:

monopoly and competition

TITLE:monopoly and competition (economics)SECTION: Concentration of sellers

Seller concentration refers to the number of sellers in an industry together with their

comparative shares of industry sales. When the number of sellers is quite large, and

each sellers share of the market is so small that in practice he cannot, by changing his

selling price or output, perceptibly influence the market share or income of any

competing seller, economists speak of atomistic...

me>Cash Flow Management Best Practice> Comparing Net Present Value and Internal Rate

of Return

CASH FLOW MANAGEMENT BEST PRACTICE

Best Practice

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Key Concepts

Comparing Net Present Value and Internal Rate of Return

byHarold Bierman, Jr

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Table of contents

Current content:Executive Summary

Current content:Introduction

Current content:Accept or Reject Decisions

Current content:Mutually Exclusive Investment Incremental Benefits: The Scale Problem

Timing

Why IRR Is Popular

Case Study

Conclusion

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Executive Summary Net present value (NPV) andinternal rate of return (IRR) are two very

practicaldiscounted cash flow (DCF) calculations used for makingcapitalbudgeting decisions.

NPV and IRR lead to the same decisions with investments that are independent.

With mutually exclusive investments, the NPV method is easier to use and morereliable.

IntroductionTo this point neither of the twodiscounted cash flow procedures for evaluating aninvestment is obviously incorrect. In many situations, theinternal rate of return (IRR)procedure will lead to the same decision as thenet present value (NPV) procedure, but

there are also times when the IRR may lead to different decisions from those obtainedby using thenet present value procedure. When the two methods lead to differentdecisions, thenet present value method tends to give better decisions.

It is sometimes possible to use the IRR method in such a way that it gives the sameresults as the NPV method. For this to occur, it is necessary that the rate of discount atwhich it is appropriate to discount future cash proceeds be the same for all future years.If the appropriate rate of interest varies from year to year, then the two procedures maynot give identical answers.

It is easy to use the NPV method correctly. It is much more difficult to use the IRRmethod correctly.

Accept or Reject DecisionsFrequently, the investment decision to be made is whether to accept or reject a projectwhere the cash flows of the project do not affect the cash flows of other projects. Wespeak of this type of investment as being an independent investment. With the IRRprocedure, the recommendation with conventional cash flows is to accept anindependent investment if its IRR is greater than some minimum acceptable rate ofdiscount. If the cash flow corresponding to the investment consists of one or moreperiods of cash outlays followed only by periods of cash proceeds, this method will give

the same accept or reject decisions as the NPV method, using the same discount rate.Because most independent investments have cash flow patterns that meet thespecifications described, it is fair to say that in practice, the IRR and NPV methods tendto give the same accept or reject recommendations for independent investments.

Mutually Exclusive InvestmentIf undertaking any one of a set of investments will change the profitability of the otherinvestments, the investments are substitutes. An extreme case of substitution exists if
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Table 1. Two mutually exclusive investments, A and B

Cash flows

Investment 0 1 IRR (%)

A $10,000 $12,000 20

B 15,000 17,700 18

Incremental (BA) $5,000 +$5,000 14

Figure 1. Two mutually exclusive investments, A and B

Figure 1 shows both investments. It can be seen that investment B is more desirable

(has a higherpresent value)as long as the discount rate is less than 14%.

We can identify the difficulty just described as the scale or size problem that ariseswhen the IRR method is used to evaluate mutually exclusive investments. Because theIRR is a percentage, the process of computation eliminates size; yet, size of theinvestment is important.

Methods of Wage Determination in India

1.Fixation of wages is a recent phenomenon in India2.There was no effective

machinery until 2 ndworld war for settlement of disputesfor fixation of wages.3.After independence of India,

industrial relations become a major issue and therewas phenomena increase in industrial

dispute mostly over wages leading tosubstantial loss of production.4.Realizing that industrialpeace is essential for progress on industrial as well aseconomic front, the central govt.
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convened in 1947, and a tripartite conferenceconsisting of representatives of employers, labour

and government.Govt. of India formulated industrial policy resolution in 1948 where the govt.

hasmentioned to items which has bearing on wagesstatutory fixation of minimum wagesPromotion of fair wages.5 . T o a c h i e v e 1

stobjective, the minimum wages act, 1948 was passed to lay downcertain norms and procedures

for determination and fixation of wages by centraland state govt.6 . T o a c h i e v e 2 ndobjective govt. of India appointed in 1949, a tripartite committeeon fair wages to determine the

principles on which fair wages should be fixedWages and salary incomes in India are fixed

through several institutions. These areCollective bargaining

Industrial wage boundGovt. appointed pay commissionsAdjudication by courts & tribunals1.COLLECTIVE BARGAINING:-Collective bargaining relates to those arrangements under which wagesand conditions of

employments are generally decided by agreementsnegotiated between the parties.Broadly speaking the following factors affect the wage determination bycollective bargainingprocess

Alternate choices & demands

Institutional necessities

The right and capacity to strikeIn a modern democratic society wages are determined by collective bargaining in contrast to

individual bargaining by working.In the matter of wage bargaining, unions are primarily concerned with

General level of wage rates

Structure of wages rates (differential among occupations)


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including those of union territories.Officers belong to all India service and armed forces.

Commission submitsits report on July 30, 1986 and recommended drastic changes in pay scale.The 5th

pay commission (1952-1996) made certain recommendationregarding restricting of pay scales

The 6thpay commissions was established on 2006 and committee submitits report on March 2008.3 . A d j u d i c a t i o n Since independence adjudication has been one of the main instruments for settlement of disputes,

improvement in wage scales and standardization of wages andallowances. Though courts

and tribunals were primarily intended to deal with settlementof industrial disputes, in practiae,wage fixation has become an important element in their work and functioning. This is because of

large of disputes concerning of wages andallowances. Numerous wage disputes in

many industries have been referred for adjudication to labour courts and tribunals during past tendecades. The high courts andSupreme Court have also adjudicated upon such disputes. The

awards given by theseauthorities not only helped in formulation of a body of principles

governing wagefixation but laid foundation for present wage structure in many of major

industries. Somemajor legislation which governs the principles of wage fixation -Minimum wages Act1948, Payments of wages Act 1936, Equal Remuneration Act 1976,

IndustrialDisputes Act 1947,and Companies Act 1956.In the field of industrial organisation, the analysis of the relationship between profitability and

market structure has given rise to abundant literature of both theoretical and empirical natures,

and itis normal to find a chapter on these questions in handbooks on industrial economics.

Generically, two alternative hypotheses have been put forward to explain the positivecorrelation usually found between performance and concentration.

On the one hand, the so-called

traditional hypothesis of collusion, or structure-conduct-performance paradigm (Bain,1951)affirms that

concentration favours the adoption of collusive agreements, thus leading to the obtaining of

monopoly

rents.

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