Market Model Patterns of Change



Market Model Patterns of Change

Introduction

The current economic condition of the nation has led many Americans wondering that what has happened to the once monetary judgment know as United States of America. The current economic situation of the state is attributed to several factors. A stable US economy relies on the indicators such as: unemployment, consumer spending, tax cut, product development, and energy costs. A Decade ago, the United States was fostering a health economy and had huge surplus of funds (Farnham, 2010). Keeping in the mind the current market situation of US we in this paper are going to explain and describe the customary pattern shift of the particular health insurance industry. Market model patterns of change of insurance industry will discussed in this paper. The purpose of this paper is to let readers know about the current customary pattern shifts of health insurance industry.

The Industry and General Pattern of Change of Market Model

I chose health insurance industry for my current analysis. The health insurance industry of U.S is characterized by quick growth and has fast pace. Unites State's health insurance providers represent a competitive market because they are many in number, no single entity has much power over prices and there is huge variety of choices. However, the insurance industry of US is undergoing a quick transformation process and slowly and gradually evolving into oligopoly. In many states insurance markets are eventually dominated and controlled by some of the large firms.

Since 1998 till 2008, there have been more than 500 health insurers' mergers. Although, today hundreds of small insurance firms are operating in the insurance market of US (Bakhtiari, 2010). The insurance industry led by WellPoint, twelve health plans cover 2/3 of the enrolment in the United States commercial insurance market. Report of an analyst predicts that 100 insurers with 200,000 members can be kicked out of the business because of small insurer's inability to effectively invest in technology and infrastructure to manage care. However, for small insurers rather than going out of the business mergers can be the main driver to remain in the industry.

Short and Long Run Behaviors of in a "Market Economy"

There are many theories that effectively explain behavior of oligopoly, however in this paper of the paper I am going to focus on kinked demand theory of Oligopoly. According to the demand model of Kinked, if prices of an organization are raised, some firms will ignore the increase in price while other firms will try to match the price cuts. In result of this model the demand curve of the firm will be kinked at the current equilibrium price [ (Department of Economics). In long run changes in the cost will not impact the output and price as long as the marginal cost remains in vertical portion of marginal revenue. In short term if the demand of the products or service is high compared to the incurred cost, firms may operate at profit. The firm can also be dissolved ...