Analysis of Market Structures and Pricing Strategies Essay

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 these circumstances, the cost structures are not the same as with the competitive industry and so we cannot say that the oligopolistic firm results in higher prices than if a competitive market structure were to be adopted. In fact going along the theory of the downward sloping cost curve we can come to the conclusion that it would be the other way around and consumers would

(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

(Demand Under Perfect Competition) What type of demand curve does a perfectly competitive firm face Why

The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.

E., & Gould, J. P., 1966). Furthermore, the members are price takers and do not have the power to influence price changes. We now understand that perfectly competitive markets are very rare and that in reality our product exists in a different type of market. The four types of markets are: Monopoly, Oligopoly, Monopolistic competition, and perfect competition. Our company has gained enough power in the market to influence price and allow it to choose its own optimal price. This means that establishing an equilibrium where QD = QS does not necessarily apply. Perhaps our company has developed an innovation that makes the quality of our microwave meal much better than our competitors or we have developed a process than drastically lowers the cost of processing the ingredients for our product. Regardless of the reason, our company now has a competitive advantage and we must take advantage of it in order to become dominant in our industry.

a. The product is identical (ie, aluminum), all the companies procure the same resources to make production with same production line and process. The firms only differentiate in terms of controlling and lowering the variable cost in order to make a profit as a price-takers. Pricing is somehow fix in global level as aluminum is openly traded in the financial market.

Perfect competition is an idealised market structure theory used in economics to show the market under a high degree of competition given certain conditions. This essay aims to outline the assumptions and distinctive features that form the perfectly competitive model and how this model can be used to explain short term and long term behaviour of a perfectly competitive firm aiming to maximise profits and the implications of enhancing these profits further.

Competition within the industry as well as market supply and demand conditions set the price of products sold.

The structure of a market is defined by the number of firms in the market, the existence or otherwise of barriers to entry of new firms, and the interdependence among firms in determining pricing and output to maximize profits. The author of this paper will cover: the advantages and limitation of supply and demand identified in the simulation, the effectiveness of the organization in which the author knows, and how the organizations in each market structure maximizes profits.

This is a market structure which is characterized with numerous firms that are almost equal in strength and none can therefore influence that price that the said market structure. This means that in this market structure the price of products is determined by normal market forces such as demand and supply (Morris & Morris, 1990). A perfect competition market therefore has the following characteristics; a large number of firms that have equal power. Another characteristic of perfectly competitive markets is that there are no barriers of entry or exit. Third, the firms are likely to trade in the same variety of products and the only competition is competition based. When it comes to the prices in this market structure, both companies and the consumers are both price takes and since none of them can determine the price of a

b) In a monopolistic market, the price will be greater than marginal cost and thus than the

I. Explain perfect competition and monopoly market structures, and identify the key factors that distinguish them.

A pricing strategy is important to any firm in realising its corporate objectives, whether that be its sales revenue, market share or indeed profit, and thus there is much preoccupation within a business about its pricing strategy. Ultimately, this will be guided by many factors; not least the market power it has to set the price of its products and the nature of the demand curve it faces. This essay will attempt to outline how a firm’s pricing strategy is influenced by the characteristics of the market in which it operates, looking at various market structures, including perfect competition, monopoly and oligopoly.