- Compare various market structures and their characteristics.
This objective’s aim was to help understand the various types of market structures namely; Oligopoly, Monopolistic competition, Perfect competition, Oigopsony, Monopoly and Monopsony. In evaluating the achievement of this objective, the group notes that the greatest difficulty in differentiating the types of markets was in the competitiveness of the different market structures. However, it was also pointed out that this differentiation could be clearly outlined in a sequence grouping the markets from the most competitive to the least competitive.
In this sequence, the most competitive market was found to be the Perfect Competition Market, followed by; Imperfect/Monopolistic competition, Oligopoly, and Pure Monopoly in that order. More importantly the evaluation of this objective’s achievement by the group reveals that an understanding of the market structures and their characteristics serve to help an economist understand the factors that determine the structure of a market. These factors were found to include; the number and size of the producers and consumers alike that are present in the market. Secondly, the type of services and goods being traded were also a factor that determines the structure of the market. Lastly, the level at which or the ease with which information flows in the market is also another factor that dictates the structure of a market.
- Evaluate the effectiveness of competitive strategies within market structures
The objective proved substantial in providing information about the functioning of different market structure with regard to their effectiveness in competitive strategies. For instance in the Monopoly structure the competitive effectiveness was eminent in its characteristics. This is because these features place the market structure at an advantage especially on the part of the supplier. Centrally, there is barrier to entry into the market hence the single supplier set the market price. Notwithstanding, the objective was found to be very limiting in providing solutions or approaches that can be adopted to counter problems that are associated with power and control over the market.
Nonetheless, the topic provides very relevant information in the field of economics that helps in understanding the conditions of operation in a market which defines the structure of the market as either perfect competition, oligopoly or otherwise. Moreover, with regard to the effectiveness and efficiency of market structures the objective provides knowledge to economists with regard to policies that different market structures can adopt in creating substantial economic efficiency. For instance, in the case of a monopoly; the law may be tailored to regulate the prices of the market through price controls.
- Determine profit maximization strategies based on market structure analysis
This objective’s aim was to provide substantial information with regard to the rolethat market structures play. This role is centered on the capacity of a market structure in enabling or facilitating firms in the industry with adequate or inadequate profits that can be put into use in product development initiatives such as Research and Development of the product or service. This information is crucial in economics in understanding the capacity for expansion of individual firms in the market given the profit being realized in the industry.
An analysis of the objective’s findings reveals that among the four major categories of market structure namely; Pure Competition, Monopolistic competition, Oligopoly and Pure monopoly, firms in the Oligopoly market had the advantageous characteristics such as large size of the firm and barriers to entry among others that favor the profit margins of the firm. Hence, with substantial profit margins firms in Oligopoly markets were found to afford to spend the highest in R&D.
On the contrary, firms in pure competition market structures due to their small sizes do not make enough profits to engage in R&D initiatives. Thus these were found to spend the least in R&D of their products. In any case these firms opt to join hands and collect a pool of funds that can be used for R&D although in very selective circumstances where such efforts do not favor competitors at the expense of the firm.
Colander, D. C. (2010). Economics (8th ed.). New York: NY: McGraw-Hill.