Research Project 1

Abstract

Market structure is the main feature of the market, which includes the number and size of firms that exist in the market, the degree of similarity or dissimilarity of goods of different firms, ease of entry of new vendors and exit and the availability of market information. Generally there are four types of the markets: the perfect competition, monopolistic competition, oligopoly, pure monopoly. Under perfect competition, the company is completely dependent on elastic demand on the price. Monopolistically competitive market consists of many buyers and sellers make transactions not on a single market price, but adopt wide range of pricing strategies. In the oligopolistic competition, different pricing strategies can be adopted depending on the nature and type of products offered to the consumer. One of the most common strategies is to follow the price of a market leader. Monopoly itself determines the prices of their products, not focusing on the pricing policies of other companies.

Research Project 1

Introduction to Market Structures

Pricing policy of the company depends on the competitive structure of the market. Market structure is the main feature of the market, which includes the number and size of firms that are on the market, the degree of similarity or dissimilarity of goods of different firms, ease of entry of new vendors and exit and the availability of market information. There are a variety of options to combine the elements of market structure, in other words, there may be different models of the market, according to which entrepreneurs enter into competition (Sutton, 2006). When the economic motive of entrepreneurs is profit maximization, the results of competition may be different, depending on the nature of the competition. The basis for the competition, as the characteristic of the market system is the freedom of choice, which is manifested in an effort to get the maximum profit. Generally there are four types of the markets: the perfect competition, monopolistic competition, oligopoly, pure monopoly.

Perfect Competition

Perfect competition is the market structure where many firms sell identical products to many buyers, when there is no barrier to entry in the industry and when companies have no competitive advantage over their competitors. Businesses operating in a market with perfect competition have no influence on the price of products and services (Ellickson, 2002). This means that any organization that wants to carve out a place in this type of market will offer its products and services at the same price than any competitor; otherwise consumers will have the reflex to look elsewhere. For example, the rice industry is a perfectly competitive industry. If a new producer of rice integrated market, prices remain the same as the impact of a single producer has no effect on the price.

For a company to survive and generate profits in a perfectly competitive market, it must be able to make decisions in the short term and longer term. The short-term decisions will be made based on seasonal and cyclical price. The long-term decisions, they will be taken more depending ...