Forms of Industrial Organization
Forms of Industrial Organization
Team Paper
University of Phoenix
Have you ever wondered how businesses decide what price to charge for their products, or how much output to produce to meet demand? These decisions largely depend on the type of industry in which the business operates. Economists group industries into four distinct market structures: monopolistic competition, oligopoly, pure competition, and pure monopoly. This paper will discuss these four market models. (McConnell-Brue, 2004, p. 413) We will show how each market is different, the number of firms in the industry, the type of product(s) produced, how they differentiate their products, and how easily other firms enter or exit the industry. We will also cover how each market model uses pricing and non-pricing strategies. Finally, we will discuss how the company in the "Market Structures" simulation evolved through the four market structures over lifecycle of its product. We begin our study by viewing Monopolistic Competition.
Monopolistically competitive markets have the characteristics of many producers and many consumers in a given market, consumers have clearly defined preferences and sellers attempt to differentiate their products from those of their competitors, there are few barriers to entry and exit, and producers have a degree of control over price. In a monopolistic competitive market an organization making profits in the short run will break even in the long run because demand will decrease, then average total cost will increase.
Hyundai Motors is an example of an organization within a monopolistic competition market structure. By producing several variations of the same vehicle, Hyundai Motors is using product differentiation to compete using non-pricing strategies. The production of the Santa Fe Sport Utility Vehicle (SUV) is an example of Hyundai Motor 's using product differentiation to compete by using non-pricing strategies, "monopolistic competition is
Team Paper
University of Phoenix
Have you ever wondered how businesses decide what price to charge for their products, or how much output to produce to meet demand? These decisions largely depend on the type of industry in which the business operates. Economists group industries into four distinct market structures: monopolistic competition, oligopoly, pure competition, and pure monopoly. This paper will discuss these four market models. (McConnell-Brue, 2004, p. 413) We will show how each market is different, the number of firms in the industry, the type of product(s) produced, how they differentiate their products, and how easily other firms enter or exit the industry. We will also cover how each market model uses pricing and non-pricing strategies. Finally, we will discuss how the company in the "Market Structures" simulation evolved through the four market structures over lifecycle of its product. We begin our study by viewing Monopolistic Competition.
Monopolistically competitive markets have the characteristics of many producers and many consumers in a given market, consumers have clearly defined preferences and sellers attempt to differentiate their products from those of their competitors, there are few barriers to entry and exit, and producers have a degree of control over price. In a monopolistic competitive market an organization making profits in the short run will break even in the long run because demand will decrease, then average total cost will increase.
Hyundai Motors is an example of an organization within a monopolistic competition market structure. By producing several variations of the same vehicle, Hyundai Motors is using product differentiation to compete using non-pricing strategies. The production of the Santa Fe Sport Utility Vehicle (SUV) is an example of Hyundai Motor 's using product differentiation to compete by using non-pricing strategies, "monopolistic competition is
References: CorpWatch, (2006). US: Boeing-Lockheed Granted Monopoly, (Originally: Pentagon Gives Launches Of Military Rockets Its Preliminary Approval, Pasztor, A., and Karp, J., (2006), Wall Street Journal. Retrieved 03 August, 2007, from http://www.corpwatch.org/article.php?id=13049 Lui, Y, Putler, D.S., and Weinberg, C.B., (2004). Marketing Science, Vol. 23: Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters. Retrieved 03 August, 2007, from http://www.sauder.ubc.ca/FacultyResearch2/Research/Documents/Weinberg/2484channels.pdf McConnell, C. R., & Brue, S. L. (2004). Economics: Principles, Problems and Policies. : The McGraw-Hill Companies. Sigouras, A. N. (1994, September/October 1994). TQM and the Market Structure. Retrieved 5 August 2007, http://web.ebscohost.com