Write a short (2-3 page, double-spaced, typed) essay identifying and describing the
conditions you observed for a business in Monopolistic Competition or a Differentiated
Oligopoly who differentiates their product. Your paper should also provide brief market
analysis including the state of the market before and after the differentiation, as well as
the observed changes that resulted. Specifically, the following questions should be
addressed:
What type of market structure was the product or service in when the differentiation
occurred?
What is the differentiation? Describe specifically what the differentiation was and tell us
what that means for rational business price and production decisions.
What was the observed change in the equilibrium price and quantity in the market, as
well as the company?
Evaluate the result of the observed change from perspectives of efficiency and equity
drawing upon price/cost margins for your explanation.
Evaluate whether the decision to differentiate the product was a good move for that
business at that time.
Evaluate whether the decision to differentiate the product was a good economic decision
for that business at that time. That is, were economic or normal profits realized as a
result?
OLIGOPOLY MARKET STRUCTURE
It is the most common market structure now a days. In oligopoly, there are few sellers and
they have the control over prices and such firms also face large barriers to entry. Although
, the products these firms offer are identical. The most important feature of the oligopoly firms
is that the firms in the market are interdependent. The price or the output being set by one
firm highly affects the price and output level set by other firms in the market. There might
also exist the situation of price leadership and follower model in the market. For this there is
need of the reaction functions of each firm in the market so that we can know the total market
output and prices being set under oligopoly market. For example, Automobile industry is an
oligopoly market structure. The prices of the Ford car and that of TATA are almost same
with slight differences. Such firms always look for the maximum market share in the market
through price cutting. Sometimes it may also lead to price war. For example, common
examples of oligopoly market structure are that of petrol, supermarkets, etc.
The key difference between oligopoly and the monopoly market structure is that in case of
oligopoly there are fewer barriers to entry as compared to that of monopoly. Therefore, in
order to promote their own product the firms spend a lot on advertisements of their products
so that they can win the race of capturing the market segment. In order to understand the level
of market share by oligopolistic firms in the market, we need to calculate the concentration
ratios in which Hirschman Index is calculated.
The objective of the firm is to earn the maximum profit or to earn the maximum revenue
through sales maximization. Government also interferes in such market structures because of
the inefficiency level they create for the society by producing the deadweight loss.
The Kinked Demand Curve Model exists only in the Oligopoly market structure which tells
that the price level will remain stable over a period of time and the firms have less incentive
to change the prices as it is not in their own interests as well. (Koutsoyiannis)
conditions you observed for a business in Monopolistic Competition or a Differentiated
Oligopoly who differentiates their product. Your paper should also provide brief market
analysis including the state of the market before and after the differentiation, as well as
the observed changes that resulted. Specifically, the following questions should be
addressed:
What type of market structure was the product or service in when the differentiation
occurred?
What is the differentiation? Describe specifically what the differentiation was and tell us
what that means for rational business price and production decisions.
What was the observed change in the equilibrium price and quantity in the market, as
well as the company?
Evaluate the result of the observed change from perspectives of efficiency and equity
drawing upon price/cost margins for your explanation.
Evaluate whether the decision to differentiate the product was a good move for that
business at that time.
Evaluate whether the decision to differentiate the product was a good economic decision
for that business at that time. That is, were economic or normal profits realized as a
result?
OLIGOPOLY MARKET STRUCTURE
It is the most common market structure now a days. In oligopoly, there are few sellers and
they have the control over prices and such firms also face large barriers to entry. Although
, the products these firms offer are identical. The most important feature of the oligopoly firms
is that the firms in the market are interdependent. The price or the output being set by one
firm highly affects the price and output level set by other firms in the market. There might
also exist the situation of price leadership and follower model in the market. For this there is
need of the reaction functions of each firm in the market so that we can know the total market
output and prices being set under oligopoly market. For example, Automobile industry is an
oligopoly market structure. The prices of the Ford car and that of TATA are almost same
with slight differences. Such firms always look for the maximum market share in the market
through price cutting. Sometimes it may also lead to price war. For example, common
examples of oligopoly market structure are that of petrol, supermarkets, etc.
The key difference between oligopoly and the monopoly market structure is that in case of
oligopoly there are fewer barriers to entry as compared to that of monopoly. Therefore, in
order to promote their own product the firms spend a lot on advertisements of their products
so that they can win the race of capturing the market segment. In order to understand the level
of market share by oligopolistic firms in the market, we need to calculate the concentration
ratios in which Hirschman Index is calculated.
The objective of the firm is to earn the maximum profit or to earn the maximum revenue
through sales maximization. Government also interferes in such market structures because of
the inefficiency level they create for the society by producing the deadweight loss.
The Kinked Demand Curve Model exists only in the Oligopoly market structure which tells
that the price level will remain stable over a period of time and the firms have less incentive
to change the prices as it is not in their own interests as well. (Koutsoyiannis)
