Essay Simulation Game

1556 Words Jan 22nd, 2014 7 Pages
Strategy Simulation Game
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Table of Contents
Introduction 2
Pure Monopoly 2
Oligopoly 3
Monopolistic Competition 4
Perfect Competition 4
Relation with Porter's Five Force Model 4
Conclusion 6
References 7
Strategy Simulation Game
Introduction
This paper explains the use of economics in managerial decision making based on the simulation. It describes decision making process of management in different market structures. The main objective of an organization is to maximize the profits in each type of market structure. Quasar Computers has done extensive research for the development of optical notebook. In the Year 2003, the company launched the first all-optical notebook
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Quasar can also control the quantity supplied and its price due to absence of competitors and substitutes. In order to increase the awareness about the product among large corporations, $600 million was spent on advertising with appropriate pricing policy. It optimized profit for Quasar by increasing demand and sales of the products. A price of $2,450 set for the computers produced total profit of $2.74 billion in the year 2004. The quantity demanded increased to 7.7 million from 5.3 million. In the following year 2005, in order to maximize the profit, the decision to upgrade the production process was taken. This increased the sales revenue and reduced the total cost for the business (Tata Interactive Systems, n.d.). The price was also decreased to $2,200 from $2,450 per unit, yielding a profit of $2.21 billion due to optimization of production processes. All these decisions taken in three years, when the company enjoyed a monopolistic situation due its patent rights, maximized the bottom line.
Oligopoly
Once the patent rights expired, the entry of Orion technologies reduced the market share of Quasar in 2006 as it captured 50% market share. It created an oligopoly market structure for the product in which each firm acts like monopolist but at the same time, the decision of a firm affects the decision of another. "A key characteristic of an oligopoly (a highly concentrated industry) is that competitors are mutually interdependent; a competitive move by one
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