Marketing Structure and Pricing Decisions
MARKET STRUCTURE AND PRICING DECISIONS
BY
ONIKOYI O. OLUWATOBI
M.sc. Marketing
A Presentation submitted to the department of business Administration and marketing
Management and Social Sciences.
In partial Fulfilment on
ECONS 801 (MANAGERIAL ECONOMICS)
Taught by
Associate Prof. Didia P. O
November, 2011
Introduction
In order to maximize profits or shareholder wealth, managers must use the information that they have relating to demand and costs in order to determine strategy regarding price and output, and other variables. However, managers must also be aware of the type of market structure in which they operate, since this has important implications for strategy; this applies both to short-run decision making and to long-run decisions on changing capacity or entering new markets.
Managers must tailor their decisions to the specific market environment in which their firms operate. For example, a manager of a business that is the patent holder and the only supplier of a new wonder drug will act differently than a manger of a firm trying to survive in the very competitive fast-food industry. Because the decision making environment depends on the structure of the market, it follows that no single theory of the firm can adequately describe all of the conditions in which firms operate. However, it does not follow that there must be a unique theory corresponding to every conceivable market structure. By categorizing markets in terms of their basic characteristics, it may be possible to identify a limited number of market structures that can be used to analyze decision making.
TYPES OF MARKET STRUCTURE Economists usually classify market structures into four main types: Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly. These types of market structure are different according to the following characteristics:
CHARACTERISTICS OF MARKET STRUCTURE
- Number and Size Distribution of Sellers. The ability of an individual firm to affect the price
BY
ONIKOYI O. OLUWATOBI
M.sc. Marketing
A Presentation submitted to the department of business Administration and marketing
Management and Social Sciences.
In partial Fulfilment on
ECONS 801 (MANAGERIAL ECONOMICS)
Taught by
Associate Prof. Didia P. O
November, 2011
Introduction
In order to maximize profits or shareholder wealth, managers must use the information that they have relating to demand and costs in order to determine strategy regarding price and output, and other variables. However, managers must also be aware of the type of market structure in which they operate, since this has important implications for strategy; this applies both to short-run decision making and to long-run decisions on changing capacity or entering new markets.
Managers must tailor their decisions to the specific market environment in which their firms operate. For example, a manager of a business that is the patent holder and the only supplier of a new wonder drug will act differently than a manger of a firm trying to survive in the very competitive fast-food industry. Because the decision making environment depends on the structure of the market, it follows that no single theory of the firm can adequately describe all of the conditions in which firms operate. However, it does not follow that there must be a unique theory corresponding to every conceivable market structure. By categorizing markets in terms of their basic characteristics, it may be possible to identify a limited number of market structures that can be used to analyze decision making.
TYPES OF MARKET STRUCTURE Economists usually classify market structures into four main types: Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly. These types of market structure are different according to the following characteristics:
CHARACTERISTICS OF MARKET STRUCTURE
- Number and Size Distribution of Sellers. The ability of an individual firm to affect the price
References: Managerial Economics; A problem solving Approach by Nick Wilkson Pg. 287 – 316. Managerial Economics; fourth Edition by H. Craig Petersen, W. Cris Lewis Pg. 307 – 309 Managerial Economics; Eight edition by Christopher R. Thomas, S. Charles Maurice Pg.pg 422 – 433.