Differientiating Between Market Structures
Differentiating Between Market Structures
Name
ECO/365
Date
Instructor
Differentiating Between Market Structures
The airline industry is a competitive market in society today. It is a perfect example of an oligopoly market structure because it is highly concentrated. There are many large players within the industry but only a few that determine the market prices like JetBlue. According to "CNN Travel" (2013) "For the ninth consecutive year, JetBlue Airways ranked first for satisfaction among all North American airlines.”
JetBlue is one of the leading organizations in the airline industry. The organization keeps the costs low which has a direct impact on the other organizations. To ensure the demand stays high the need to keep the prices low is important. If only JetBlue kept its prices low then the organization would not be able to handle the supply side. There are only so many planes. Therefore they keep them low enough to have competition with the other airlines.
One of the reasons the airline industry is an oligopoly is due to the demand of travel and the basic needs of a typical passenger. Business travel does seem to be more of where the competitive side comes in though. Regardless of where the airline is currently ranked it is one of the major players in the market. The market structure was chosen because there are many barriers to enter the market.
In the event the airline industry chose to use the perfect competition structure anyone could enter and exit as they pleased because there are no barriers in this structure. If the industry was in a monopoly structure there would be a lot less travel. The demand may also be low because the firm would have total control over the prices therefore more than likely have them too high. If a monopolistic competition was chosen there would be minimal barriers and many firms therefore allowing many people to get in and create chaos. Having minimal competition the prices are manageable.
Name
ECO/365
Date
Instructor
Differentiating Between Market Structures
The airline industry is a competitive market in society today. It is a perfect example of an oligopoly market structure because it is highly concentrated. There are many large players within the industry but only a few that determine the market prices like JetBlue. According to "CNN Travel" (2013) "For the ninth consecutive year, JetBlue Airways ranked first for satisfaction among all North American airlines.”
JetBlue is one of the leading organizations in the airline industry. The organization keeps the costs low which has a direct impact on the other organizations. To ensure the demand stays high the need to keep the prices low is important. If only JetBlue kept its prices low then the organization would not be able to handle the supply side. There are only so many planes. Therefore they keep them low enough to have competition with the other airlines.
One of the reasons the airline industry is an oligopoly is due to the demand of travel and the basic needs of a typical passenger. Business travel does seem to be more of where the competitive side comes in though. Regardless of where the airline is currently ranked it is one of the major players in the market. The market structure was chosen because there are many barriers to enter the market.
In the event the airline industry chose to use the perfect competition structure anyone could enter and exit as they pleased because there are no barriers in this structure. If the industry was in a monopoly structure there would be a lot less travel. The demand may also be low because the firm would have total control over the prices therefore more than likely have them too high. If a monopolistic competition was chosen there would be minimal barriers and many firms therefore allowing many people to get in and create chaos. Having minimal competition the prices are manageable.
References: CNN Travel. (2013). Retrieved from http://www.cnn.com/2013/05/15/travel/airline-satisfaction-survey