Assignment: Discussion-Market Structures

Industries can be classified under different market structures and this classification strongly dictates decisions made by managers within the market. For example, in an industry classified under perfect competition, or in a perfectly competitive market, many competitors offer the same product and entry into the industry is easy. In this market, the pressure to maintain the same prices as the competitors is high, which characterizes this market.

On the other extreme, some industries are classified as monopolies and some fall under monopolistic competition. In a monopoly, there is only one provider of a product or a service, which has an inelastic demand. In this case, there is little incentive for the monopoly to be efficient or price competitive. In a monopolistically competitive market, there are many firms selling a product or service that is only slightly differentiated from one another, and in the long term, these firms start showing characteristics of a perfectly competitive market.

Tasks:

Find an article about an industry in the United States, such as the pharmaceutical industry. You can consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and other publications for your reference.

After reading the article, respond to the following:

• Identify the market structure that best characterizes the industry described in the article.

• Explain the factors you considered when identifying the market structure for this industry.

• Analyze whether this industry will work better if it changes its market strategy and starts showing characteristics of another market structure.

• Critically analyze the advantages and disadvantages of the market structures that you studied in the readings.