It also continues to make above-normal profit
margins - expected to be around 27% this year, compared with 7.5% in 2009 - on the products it offers.
As with the sales/cost technique, entrepreneurial profit is implied if the income value exceeds cost; if profit has been included in the cost estimate, above-normal profit
This study is inspired by the following observation, an insight many supply chain managers and executives may not have considered: When a company's competitive advantage is speed to market, how can it maintain its normal sales level during a supply chain disruption and at the same time manage to overtake a competitor's market share for normal or above-normal profits?
Not only that, when competitors are also impacted by the disruption, companies positioned to get products to the market will likely gain market share for above-normal profits.
The innovating firm is capturing greater producer surplus (defined by [P.sub.2]EJK) and above-normal profits
and, by the same token, other firms are experiencing smaller producer surplus and below-normal profits (suffering economic losses).
If the next-best alternative to Acme Co.'s Better Mousetrap is XYZ Co.'s Mediocre Mousetrap--and if the government doesn't artificially block entry into the mousetrap-manufacturing business--then Acme Co.'s above-normal profits
deserve applause and not ridicule.
Indeed, the very efficiencies that LTCM and its competitors brought to the overall financial system gradually reduced the opportunities for above-normal profits
. Indeed, LTCM acknowledged this when returning $2 3/4 billion of capital to investors at the end of 1997.
Such competition virtually is guaranteed if the predator is charging monopolistic prices and earning above-normal profits
Since all above-normal profits
would be competed away, prices should be aligned with cost now to remove the incentive for entry.
This challenge is suspect because if a market is competitive, above-normal profits
, whatever their origin, should be driven down to a competitive level.