The Price Theory of Coca-Cola Company
Jing Wen
Paul Bennett
ME, GFGB 6003-001
30 December 2012
The Price theory of Coca-Cola Company Coca-Cola is a well-recognized soft drink brand in United States. According reports from Coca-Cola in 2012.Coca-Cola Company sells its product around the world in more than 200 countries and has a product portfolio of more than 35,000 drinks. Based on Interbrain’s best global brand 2011, The Coca-Cola brand is worth $74 billion and therefore was the world's most valuable brand.
The market type of the Coca-Cola Company The Coca-Cola Company is a monopoly, because Coca-Cola has the ability to affect market prices through its actions. Despite the report from the Web of Coca-Cola, Coke has been a firm leader in the U.S. carbonated drinks market, with 42.8% market share and Pepsi's 31.1%. Therefore, the market, which Coca-Cola belongs, is not a perfectly competitive market. As a result, we can conclude that Coca-Cola has Monopoly power for it faces a downward-sloping demand curve, displayed in Chart 1. Because the Coca-Cola is a Monopolist, it can decide both it’s price and supply. A monopolist has no supply curve. In order to maximize the profit, the Company choose where MR=MC. Therefore, the price of Coca-Cola is P and the quantity is Q. The consumer surplus is in area B and the supplier surplus is area A, and the deadweight loss is in area C. The area C is the amount by which the consumer’s losses exceed the producer’s gain.
Chart 1
Chart 1
Q
Q
P
P
D
D
MC
MC
Price
Price
Quantity
Quantity
0
0
B
B
C
C
A
A
MR
MR
The sources of Coca-Cola Monopoly power The Coca-Cola owns around 100 brands in US, such as Sprite, Dasani, Nestea, Monster, Fanta and so on. Coca-Cola uses overlapping technologies to produce multiple products in same factory by using same equipment. This method benefits a lot to the Coca-Cola, which allow the product line to operate more efficient than the small company and specialized company.
Paul Bennett
ME, GFGB 6003-001
30 December 2012
The Price theory of Coca-Cola Company Coca-Cola is a well-recognized soft drink brand in United States. According reports from Coca-Cola in 2012.Coca-Cola Company sells its product around the world in more than 200 countries and has a product portfolio of more than 35,000 drinks. Based on Interbrain’s best global brand 2011, The Coca-Cola brand is worth $74 billion and therefore was the world's most valuable brand.
The market type of the Coca-Cola Company The Coca-Cola Company is a monopoly, because Coca-Cola has the ability to affect market prices through its actions. Despite the report from the Web of Coca-Cola, Coke has been a firm leader in the U.S. carbonated drinks market, with 42.8% market share and Pepsi's 31.1%. Therefore, the market, which Coca-Cola belongs, is not a perfectly competitive market. As a result, we can conclude that Coca-Cola has Monopoly power for it faces a downward-sloping demand curve, displayed in Chart 1. Because the Coca-Cola is a Monopolist, it can decide both it’s price and supply. A monopolist has no supply curve. In order to maximize the profit, the Company choose where MR=MC. Therefore, the price of Coca-Cola is P and the quantity is Q. The consumer surplus is in area B and the supplier surplus is area A, and the deadweight loss is in area C. The area C is the amount by which the consumer’s losses exceed the producer’s gain.
Chart 1
Chart 1
Q
Q
P
P
D
D
MC
MC
Price
Price
Quantity
Quantity
0
0
B
B
C
C
A
A
MR
MR
The sources of Coca-Cola Monopoly power The Coca-Cola owns around 100 brands in US, such as Sprite, Dasani, Nestea, Monster, Fanta and so on. Coca-Cola uses overlapping technologies to produce multiple products in same factory by using same equipment. This method benefits a lot to the Coca-Cola, which allow the product line to operate more efficient than the small company and specialized company.