The product of a firm is close, but not perfect substitute of other firm. Buyers are therefore willing to pay different prices from the same product that is produced by different firms, giving the individual to influence the market price of its product. 3. Selling costs: Under monopolistic competition, products are differentiated and these differences are made known to the buyers through selling costs. Due to this reason, selling costs constitute a integral part of the total cost under monopolistic
In accordance with intergovernmental agreements Gazprom signed contracts on gas supplies to consumers in Ukraine, Republic Belarus and Republic of Moldova. The maximum quantity is supplied to the markets of Ukraine and Belarus. Are gas supplies to Moldova, Georgia, Armenia, and since 2004 in Azerbaijan. In 2003, the Company has delivered to the CIS countries and Baltic States of 42.6 billion cubic meters, including in the classification of the services for transit of Russian gas through Ukraine and Belarus to European countries – 29,7 billion cubic meters. A major problem in the development of cooperation of JSC "Gazprom" with the CIS countries is the existing debt for OAO Gazprom natural gas.
The agreement so entered by the competitors must have an appreciable effect on the market so as to qualify itself for being restricted by the competition law. Some of the parameters to judge the effect of the agreement on the market are as follows: • The aggregate of business that is being controlled by the competitors. • The remaining strength of the
The government does not intervene in the market, so that pricing occurs because the market mechanism, which is the relationship between demand (demand) and supply (supply). State interference is limited to matters that cannot be cultivated private but is a prerequisite for the implementation of the free market, such as national security. Free market economic system provides flexibility to the community to determine and regulate its own economic activity they will be doing. As a system, free market economy has its advantages and disadvantages. The advantages of free market economic system: 1.
State of limited competition, in which a market is shared by a small number of producers or sellers. Meaning the market only has a handful of companies functioning in the same structure. The substitution of a product for another product or one vehicle for another it is completely possible in an Oligopoly market only from one of the few companies in the Oligopoly market structure. In the United States these companies would include Ford, GM, and Chrysler (Grunert n.d.). It is extremely difficult for any new Company wanting to enter into an Oligopoly market structure.
Public Joint Stock Company "Gazprom" - one of the major participants in the global energy markets, can make a significant contribution to their stabilization and ensuring global energy security, which is one of the main components of its development strategy. Gazprom’s main activities are exploration, production, transportation, storage, processing and sale of gas, gas condensate and oil, as well as the production and sale of electricity. In the world ranking of oil and gas company "Gazprom" ranks first in production of natural gas. In terms of oil production and refining "Gazprom" is among the five largest Russian oil companies, and among twenty world leaders in the oil business. The role of Gazprom in the global energy markets is not limited
Perfectly competitive market A perfectly competitive market according to Liozu, 2013 is a general market where competition is at its highest level. Economists that are neoclassical suggest that perfect competition produces the best results for the society and the consumers. Perfect knowledge characterizes perfect competition: this is where knowledge is freely offered to all the participants, there are no time lags or failure of the information in its flow. This means that the entrepreneur's role is limited and the risks to are minimal. Given that these consumers and the producers both have a perfect knowledge it's then assumed that they make rational decisions that maximize their self-interest, the producers maximize profits while the consumers
Because Gazprom is a monopolist it is easier to change the price, since there are no competitors in their area and barely any reasonable substitution good. Because of the lack of substitution and the fact that people cannot afford to not buy gas, Gazprom will be able to increase their producer surplus which will result in a decrease of the consumer
The assumptions of monopolistic competition are as follows: • The industry is build of large number of firms • Firms are free to enter or leave the industry • All firms produce slightly differentiated products • Price maker Like perfect competition, there are no barriers to entry or exit. Though unlike perfect competition the products are not identical, competitors sell products that are differentiated from one another. More like Monopoly, in Monopolistic Competition the firms are price makers thus the producers decide the products’ prices. Oligopoly is a market structure where its challenge is between monopoly and monopolistic competition. The market is dominated by a few firms; firms either sell identical or differentiated products.
An example of this would be the breakfast cereal industry. (J Strydom 2014) Perfect competition is a market state where there are a sufficient number of buyers and sellers so that all elements of a monopoly are absent and the market price of goods and services are beyond the control of individual buyers and sellers. E.g Farmers selling fruit in South