What type of company is more likely to charge a bigger markup due to lack of competition?

A pharmaceutical company selling a new powerful antibiotic is more likely to charge a bigger markup due to limited competition in the market. When a pharmaceutical company develops a new drug, especially one that is innovative and not yet available from other sources, it often holds a patent or exclusivity rights. This gives the company a significant competitive advantage, allowing it to set higher prices without the pressure to lower them due to competing products.

The high cost of research and development in the pharmaceutical industry also contributes to this pricing strategy. Companies often invest substantial resources into developing effective treatments, expecting to recoup their costs through higher markups. The lack of alternatives in the market allows these firms to maintain higher profit margins until generics or competitive treatments enter the market after the patent expires.

In contrast, a tech company may face fierce competition, constantly innovating to stay relevant, which often results in competitive pricing. Grocery stores and discount retailers operate in highly competitive environments where price sensitivity among consumers can lead to lower markups to attract more customers.