Evaluation of Baumol's Model

Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open to competition for market share to begin. In terms of regulation of monopoly, the government attempts to prevent operations that are against the public interest, call anti-competitive practices. Likewise, oligopoly is a market condition where there are minimal distributors that have a major influence on prices and other market factors. This causes market failure, especially if evidence of collusive behavior by dominant businesses is found.

2. (Price Leadership) why might a price–leadership model of oligopoly not be an effective means of collusion in an oligopoly?

Oligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.

Welch Manufacturing has excess capacity. The following per unit data apply for sales to regular customers:

Therefore, each division should be autonomous in its decision making. This, however, is not the case with our company. As a matter of fact, the corporate office is influencing and forcing divisions to make the buy and sell decisions from each other at the instructed price of 1.25 times of full production costs. To be a true profit center, the divisions should have the authority to determine and negotiate prices of their products either based on market or through internal resources to ensure profitability. In addition, to be able to ensure operational excellence, managing the costs such as production cost, administrative and selling overheads, should be a priority.

Due to uncertainty, firms may want to ensure a stable amount of profit, collusion may be an option for them.

The total revenue, TR, is the overall amount of all sources of a business’s income. It consists of total sales or profit, over a period of time. The TR can be calculated by taking the price and multiplying it by the quantity. For example, if a business decides to retail another product and the total revenue does increase, thus the marginal revenue would be greater than zero. However, if the business decides to sell another product and the marginal revenue is zero, then there would not be any changes to the total revenue.

The monopolistic rivalry business structure incorporates numerous organizations offering somewhat separated items. There is a simple passage into the business sector by new firms over the long haul, and the organizations are sufficiently extensive to impact the aggregate supply. There are likewise various measurements of rivalry, including dissemination outlets, promoting, and item characteristics. The peripheral expense will be not exactly the cost at its benefit amplifying yield level. As indicated by the content, a monopolistic contender can't make long-run benefit (Colander, 2013).

Decisions will be made by using the concepts of marginal costs and marginal revenue to maximize profit. A mix of pricing and non-pricing strategies will be

McGuigan, J.R. Moyer, R.C. & Harris, F.H. deB (2014). Managerial Economics; Applications, Strategies and Tactics (13th ed.). Stamford, CT: Cengage Learning

These factors influence the internal environment of an organisation and they help in identifying the past and the present of the company, It also provides a frame work for reviewing strategy position and direction of the company.

The internal factors are inclusive of the marketing mix of the organization and the organizational goals. The product itself is a huge

When companies are making decisions, the companies do not worry about how the rivals will react, in part to each company’s actions are unlikely to affect its rivals to a great extent hence they are independent. In addition, there is perfect knowledge in the market hence new companies have the freedom to enter into the industry. The companies are also profit maximizers, producing output where marginal revenue equals marginal cost; the profit maximising condition. Companies in a

Perhaps one of the most difficult managerial decisions in the 21st century is the decision to make a decision. Analysis paralysis, endless meetings, and corporate structure have made it painstakingly difficult to come to any real conclusions. So when the Chief Financial Officer, Bruce Berman, of Bloomindale’s was tasked with decision to implement ProfitLogic’s Pricing Optimization (PO) system, he called upon Daniel Gabbay, an analyst in the finance division, to make sense of the numbers and guide his decision making process. Berman was considering implementing a PO system to quantify the markdown

“An observation made of oligopolistic business behaviour in which one company, usually the dominant competitor among