Introduction
A market is a dynamic and restless institution where commercial dealing between buyers and sellers takes place. There are many companies and businesses that run the market. According to how the firm functions and other factors like the number of competitor firms and the type of products produced, the firm is classified into a particular market structure. The other competing firms in the market structure affect the pricing strategies of a particular firm in the same industry. Based on all the facts mentioned above, there are four general market structures – Pure Competition, Monopolistic Competition, Oligopoly and Monopoly. This paper explores these market structures and how they affect the prices, supply and demand and the
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This means that the demand is highly elastic and thus the firm has no control over the prices. Farming is an example of a purely competitive market structure. The entry to this industry is fairly simple and there are several other farmers. This makes the demand highly elastic. On the other hand, a monopolistic competitive market firm is the one in which there are many firms producing the similar products but the products are not substitutes. For example, Nike and Adidas are companies producing shoes but there is a difference in the shoes that they produce. This implies that there is some control over the price since elasticity tends to be lower, but it is not considerable since buyers still have other options. Going a step further in terms of control over price, we have Oligopoly. This market structure consists of few companies and rather limited price control. While purely competitive firms are price takers, oligopoly firms can be considered as price setters, which can be explained through collusion. For example, different phone service providers form an oligopoly market structure and set their own price but this can change depending on how a competitor firm’s strategies affect their profit. Finally, the pure monopoly market structure is the one in which there is a single company providing the product and this leads to a high control over the prices. Since it is the only
The second form of competition and final aspect of market conduct in an oligopoly is price competitive and is more applicable to supermarkets because unlike computer or car manufactures they usually have a very similar range of products to offer, and therefore depend on lower prices to outcompete the other firms. However this can often lead to a kinked demand curve a curve where there is two points at which the firms demand curve is elastic and at another point inelastic. The elastic section of a kinked demand curve occurs when a firm increases its prices and in response the competitors keep their prices as they are at a lower price. The inelastic portion is derived when a firm reduces its prices and competitors meet these prices causing an inelastic
Within the framework of an oligopolistic market, mergers could also result from what can be described as a behavior of “oligopolistic reaction”. (Knickerbocker, 1973) defines oligopolistic reaction as “a corporate behavior by which rival firms in an industry composed of a few large firms counter one another’s moves by making similar moves themselves (Knickerbocker, 1973). Thus, if two firms in an oligopolistic industry merge, others might react by merging in turn (Cantwell, 1992), independently of whether shareholders will gain or lose as a result.
1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an
In this article Michael Baker discusses the livelihood of small retailers in a market subjugated by the financially dominant oligopolies, Woolworths and Coles. While the small independent retailers in direct competition with Woolworths and Coles provide some competitive respite for consumers, as they encourage competitive pricing, albeit predatory pricing, it is clear that Woolworths and Coles control the supermarket industry in Australia, in the formation of a duopoly. It is evident that Woolworths and Coles engage in predatory pricing in an attempt to eliminate independent retailers from the market. This article discusses recent efforts made by the Australian government and the Australian Competition
Competition within the industry as well as market supply and demand conditions set the price of products sold.
Monopoly isn’t just a board game where players move around the board buying, trading and developing properties, collecting rent, with the goal to drive their opponents into bankruptcy. However, the game Monopoly was designed to demonstrate an economy that rewards wealth creation and the domination of a market by a single entity. Monopoly and Oligopoly are economic conditions where monopoly is the dominance of one seller in the market and an oligopoly is a number of large firms that dominate in the same industry. Even though monopoly and oligopoly coexist in the same market, they do have some differences. In many cases, monopolies arise because the government has given one person or firm the exclusive right to sell some good or service. Since monopolistic markets are controlled by one seller, the seller has the power to set prices too high amounts. Monopoly companies give consumers limited choices on what to pay and what to choose from what is supplied. Oligopoly is consumer friendly because it promotes competition amongst sellers with moderate prices and numerous choices in products. Examples of oligopoly area wireless carriers, beer companies, and different types of media like TV, broadcasting, book publishing and movies. This essay will discuss descriptive section on how monopolies and oligopoly apply to microeconomics; it’s historical backstory, the government involvement with handling monopolies and oligopoly, how it applies to college life and the overall importance to
While a monopoly usually involves one firm with significant control on the market, an oligopoly contains a few firms. An oligopoly is a market structure where a few companies selling identical or differentiated products control the marketplace. The few players in an industry are usually quite large compared to the market for the product, thus giving these few players an advantage at market control. There are barriers to entry in oligopolies that include patents or government grants, ownership of resources, cost prohibitive barriers, brand equity and diminishing average cost.
Monopoly is the dominance of just one seller in the market and oligopoly is an economic situation where many sellers populate the market. Netflix is one of the most popular and dominant in streaming services. It basically provides identical service which people could subscribe to their service and allow individuals to stream any movies online. Netflix is oligopoly competition because it is a paid online video service with few competitions. Some of the competition are Amazon, YouTube, DVDs, and streaming online. New firms will be finding a tough time to enter the market due to economies of scale. Netflix is developing current ways to take over the market share.
Oligopolistic is a market structure which under the imperfect competition. According to Sloman & Garratt, oligopoly is only few large firms share a large portion of industry and control the market. When we hear that a term about “Big three”, “Big four” or “Big five” it can be set down as oligopolistic industry. In the oligopoly market competition, depends on the firms produce homogeneous or differentiated products and it will be categorize as homogeneous oligopoly or differentiated oligopoly. As Mcconell & Brue, 2008 stated because of the small number of firms, oligopolistic have worthy of consideration command over the prices and they have to think about their competitors conceivable reaction to their product`s price, product`s quality, advertising outlays and so on. The few large firms are interdependent but they have to always be awake of competitor`s action to maintain their firm can stand strong in the industries. Oligopolistic have a strong barriers of entry for the new competitors, which alike and dedicative by the pure monopoly. According to Jackson, Mclver & Wilson stated oligopolistic industries have a large economies of scale have to be consider for the new competitors because they must have a large amount of capital to invest heavy on the technology in the beginning, and this is the prevention of new competitors can easily enter to the industry. Furthermore, there are many industries are counted as oligopolistic for instance mining, steel, soft drinks, airlines,
Unlike competitive markets consisted of a large number of producers which compete with one another to satisfy consumer’s needs and have no influence on price, monopolistic markets are made up of only one producer who is able to control prices in the market. Stager (1992) notes it is the case of a pure monopoly which appears when a commodity is produced by only one producer and it does not have any close substitutes (cited in Manesh and Karimani, 2017). Evidently, in the absence of alternative products, the producer does not compete with others. He furthermore states this tendency happens rarely in real world since majority of commodities could be replaced by other raw materials. It is, therefore, considered the definition of monopoly relies
Perfect competition, at the other end of the spectrum, has a large number of firms that all make or sell the exact same product, such as beef or milk. These firms are price takers as there is no one firm that can influence price. (Price Taker, n.d.) If one firm tried to raise prices or cut back production to influence supply and demand there are several other companies to which consumers can take their business.
The concept of monopoly relates to a situation where a large part of the market if not all, is controlled by one company or group of companies. Monopoly identifies with the market share ownership where one organization supplies a given product to the market in the absence of alternative or substitute suppliers (Trageks, 2010). The case scenario in this study presents a monopolistic market situation. The fact that Futures Unlimited Corporation is the single license owner approved to distribute and control plutonium presents a monopolistic situation. Monopolistic markets post different results on organizations depending on the company 's management decisions. Although many monopolies employ the single price strategy in ensuring the maximization of profits, the effectiveness of this model posits a question of fact. A single priced monopoly indicates that elasticity in demand affects a single price monopoly in such a way that increased prices lead to decreased consumption of the commodities. In this scenario, the monopolistic situation leads to the reduction of revenue as well as profits. A monopolistic organization will only make profits in the situation where marginal revenues exceed marginal costs. In the event a monopolistic market increases production where revenue equals costs, the company experiences decreased revenues as well as profitability. A single priced monopoly likely has a reducing effect on the company 's profitability with an extra output. However, the
In economics, there are four market structures that function in the worldwide market. Each of these market structures correlates with one another to create the demand and supply of the market. However, these market structures have some unique traits that no other theory can have alike. Therefore, a comparison and contrast is necessary to distinguish each of these theories from one another. These market structures of the economy are perfect competition, monopoly, monopolistic competition, and oligopoly. These market structures will reveal the difference and similarities that each one has.
Bertrand oligopoly pricing is key to be most profitable. As one company cuts prices another
b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.