ECONOMICS

Pricing Strategies in Oligopoly Market

Pricing Strategies in Oligopoly Market

Introduction

Price is the weapon of choice for many companies in the competition for market shares. Many marketers believe that the most powerful competition trend currently used by shaping the marketing and business strategy is the pricing strategy because it has a direct impact on a company's profitability. It is clear that companies face stiff competition among themselves. The competition has an important implication for market share companies have to use effective pricing strategies to increase profitability, boost brand power and fight off competitors. Business is a game and every firm is vulnerable to attack by the competitors, for long term sustainability airlines need to play the role effectively in this game. Pricing Strategies have been assumed as a strategic, financial control tool. It is well established that in markets with asymmetric information firms may use prices, possibly in conjunction with additional marketing devices, to signal quality information to uninformed market participants.

In this academic essay, we will be discussing the pricing strategies in the context of cost, price and value of products and services offered by the company to its target market. In addition to that, game theory will also be discussed. Further, we will be explaining that how a company can set its prices while operating in the oligopoly market. It is explained with the help of Kinked diagram.

Discussion

In economics, the oligopoly refers to a form of market characterized by a small number of sellers (or suppliers) faced with a multitude of buyers (or applicants). When there are only two vendors, we use the term duopoly. In economic theory, the oligopoly is a situation of imperfect market. Indeed, in the context of competition pure and perfect, the suppliers must be independent, which is not the case of an oligopoly in which the profit of a seller depends on the attitude of others.

The oligopoly is the result of the trend towards concentration of producers. Indeed, in some sectors, producers have an incentive to grow to achieve economies of scale that generate gains in productivity. The economic optimum being reached the state of monopoly (single seller), bureaucratic institution is opposed to taking into account the interests of consumers. They promote the emergence of new suppliers or maintenance of existing suppliers.

In an oligopoly, sellers can engage in fierce competition, or make arrangements. Indeed, with a dominant position, the oligopolists are tempted to agree on prices and quantities offered to share the market and maximize their profits. Such agreements (cartel), returning to a situation of pseudo monopoly, are prohibited by competition law. Example in Narnia: the agreement of the mobile operators to stabilize their market share and SMS bill well above their cost price.

Pricing Strategies

Established companies have the ability to improve their profitability with the help of regular review of its pricing policy. While setting prices, companies should make sure that the prices and the level of sales will allow business to be profitable. The following considerations must be made to develop ...