Final answer:
Competition in an industry is evidenced by factors such as market power distribution, product similarity, obstacle to new entrants, and types of competition such as pricing or advertising. The technology and airline industries are examples of highly competitive markets. Legal tools that can affect competition include exclusive dealing, tie-in sales, and predatory pricing.
Step-by-step explanation:
When assessing competition in an industry, we should consider how much market power each firm possesses, the similarity of products between firms, the barriers to entry for new competitors, and whether firms compete based on price, advertising, or other product distinctions. For example, evidence of serious competition might include a high level of advertising warfare, frequent promotions, a short cycle of new product releases, or a low Herfindahl-Hirschman Index indicating a market with many competitors. Two industries known for high competition are the technology industry, with rapid innovation and product development, and the airline industry, characterized by fierce competition on pricing, routes, and customer service.
Regarding legal tools for promoting competition, exclusive dealing and tie-in sales may reduce competition but can occasionally be justified. Predatory pricing is particularly troubling as it involves firms setting prices below costs to drive competitors out; it is often harmful to the competitive landscape and can be challenging to regulate.