Market Structure and Pricing Power
Select a new, realistic good or service for an existing industry, preferably an industry you current work in or one in which you are interested in working.
Develop a 1,400-word evaluation of pricing strategies available producers of your selected product. This will include statements about the market structure and the elasticity of demand for the product, based on text book principles and real world products under development.
- Identify the market structure of the industry (monopoly, oligopoly, monopolistic competition, pure competition).
- Determine elasticity of demand for various quality ranges of the product based on textbook theory and judgments about the degree of luxury vs. necessity represented by various brands (e.g. a luxury car vs an economy car).
- Determine how pricing relates to elasticity of demand for competing models.
- Explain how changes in the quantity supplied as a result of pricing decisions might affect the company's marginal cost, marginal revenue, and market share as production volume rises. What reaction might be expected by other producers if one producer changes its pricing strategy?
- Determine strategies that a company might use to develop product differentiation and market segmentation. What alternative non-pricing strategies are available? What alternative non-pricing strategies can be used to increase barriers to entry?
- Discuss how producers might alter the mix of fixed and variable costs to support their pricing strategy.