While making the analysis, the basic structural and behavioral assumptions of the market structures will be incorporated which are number of sellers, cost conditions, number of buyers, demand conditions, objective function, strategic variable, expectation of rivals’ reactions.
Number of Sellers: There are about more than 30 automobile companies operating in Turkey which are engaged in directly or indirectly (via distributors) selling automobiles in Turkey. Regarding the structural assumption of seller number, it can be concluded that there are few number of sellers in the market. The reason behind the few number of sellers is the substantial barriers to entry into the market, which is due to the high investment amount needed to start production.
Cost Conditions: Given the scale of productions as constant, the companies face with diminishing returns which results in an increase in marginal costs in the short run.
Number of buyers: Mentioned production companies generally sell the products to either individual consumers or to the distributors of the brands. That’s, it can obviously said that there are many buyers in the market.
Demand conditions: In the market, there are different segments of cars that are sold such as Compact segment, B segment, SUV segment etc. Each company produces different types of cars for each segment, however, different brands in the same segment can easily be substituted for each other. That’s, the products in the same segments are close substitutes of each other.
Objective function: As in all other markets, aim of the automobile market in Turkey is the short-run profit maximization. Those companies try to decrease the production costs via...