Reflection Paper
REFLECTION PAPER
BY
ECONOMICS
FEBRUARY 19, 2010
During this previous week, our learning team began discussing the topic of
market structures. According to our readings, there are four different types of market
structures such as pure competition, a pure monopoly, a monopolistic competition, and
an oligopoly. Each one of these market structures are diverse in definition,
characteristics, and in application, which will be further explained later in detail. We had
learned that each one of these four market structures can be applied to businesses,
organizations, and many other companies and can also have an impact on their pricing
strategies, organizational goals, creating non-price barriers to entry, increase product
variety, strategies on price reductions. These concepts explained how the
businesses, organizations, and companies of today manage to stay in business and to stay
in compete with their major competitors.
As it was mentioned, determining pricing strategies is a valuable process that businesses benefit from. In an oligopoly, a business using a high-price strategy would be more effective if the competitor’s pricing was also a high-price strategy. The same concept applies to companies with a low-pricing strategy. Oligopolies acting independently may mutually end up with competitively low-price strategies (McConnell, Brue, & Flynn, 2009). Organizations in a monopolistic competition can set prices and output levels to maximize the company’s profit, without as many rivals as an oligopoly market structure. In an oligopoly, an organization uses pricing models such as the kinked-demand curve, collusive pricing, and price leadership. In a monopolistic market, a company uses price, product, and advertising to reach organizational goals of maximizing profit (McConnell, Brue, & Flynn, 2009). In addition, the demand curve of an organization is an important factor in
BY
ECONOMICS
FEBRUARY 19, 2010
During this previous week, our learning team began discussing the topic of
market structures. According to our readings, there are four different types of market
structures such as pure competition, a pure monopoly, a monopolistic competition, and
an oligopoly. Each one of these market structures are diverse in definition,
characteristics, and in application, which will be further explained later in detail. We had
learned that each one of these four market structures can be applied to businesses,
organizations, and many other companies and can also have an impact on their pricing
strategies, organizational goals, creating non-price barriers to entry, increase product
variety, strategies on price reductions. These concepts explained how the
businesses, organizations, and companies of today manage to stay in business and to stay
in compete with their major competitors.
As it was mentioned, determining pricing strategies is a valuable process that businesses benefit from. In an oligopoly, a business using a high-price strategy would be more effective if the competitor’s pricing was also a high-price strategy. The same concept applies to companies with a low-pricing strategy. Oligopolies acting independently may mutually end up with competitively low-price strategies (McConnell, Brue, & Flynn, 2009). Organizations in a monopolistic competition can set prices and output levels to maximize the company’s profit, without as many rivals as an oligopoly market structure. In an oligopoly, an organization uses pricing models such as the kinked-demand curve, collusive pricing, and price leadership. In a monopolistic market, a company uses price, product, and advertising to reach organizational goals of maximizing profit (McConnell, Brue, & Flynn, 2009). In addition, the demand curve of an organization is an important factor in
References: McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, Problems, and Policies (18th ed.). New York, NY: McGraw Hill/Irwin.