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Market Setting Strategy: Market Structures And Pricing Strategies

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Market Structures And Pricing Strategies 1

MARKET STRUCTURES AND PRICING STRATEGIES
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Market structures refer to the number of firms in the market that produce identical goods and services. Market structure greatly influences the supply of different commodities in the market place and consequently the behavior of firms in the industry. Pricing decisions and strategies are very crucial aspects when it comes to market structures since every economic activity in the market is measured as per the price (Bar-Gill, 2012). Before coming into a final decision towards the price to set, stakeholders who are mostly the managers need to critically analyze each market need and the existing conditions and emerging developments. …show more content…

In this market structure there are many buyers and sellers in the industry. The characteristics of many sellers give the monopolistic completion its competitive nature. When there are many sellers in the market they do not take into account the reactions of the rivals. It indicates that the industry concentration ratio is below the required standards. Consumers believe that there is product differentiation. Participants in the market perceive that there are non-price differences among all the products (Etro, 2013). Differentiation exists when advertisements convinces people to buy the products and the marginal benefits of advertising are more than marginal costs There is strong competition in the market and customer exchange takes place. Competition is brought about by product differentiation, competitive advertising and production of quality products. In this market structure there are low chances of barriers to entry and exit out of the market. In the long run market the entry into the market is not limited. Barrier to entry are of disadvantage because it reduces the competitive nature and also it reduces the chances of making long run …show more content…

Producers and customers make their own decisions such that; even the prices are not determined by the forces of demand and supply. Also unlike the perfect competition, there is no perfect knowledge of products and services and their products. Consumers do not have information about other firms? productions and pricing decisions. Also all the firms have the same ability to influence the prices o commodities in the market. They influence supply and therefore they can be able to manipulate the prices of commodities .An example of a market power is the company of Apple.Inc in the marketplace o smart phones. Apple phones have greater market share because of it customer loyalty therefore it can manipulate the prices of all smart phones in the market. In a monopolistic competition there is a principle of market differentiation, which states that it is often a reasonable practice for firms when a market to make their goods and services as close as possible to their competitors which includes for example, the business location of their main market place for customers (Bar-Gill, 2012). Also a concept of competitive pricing applies in monopolistic

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