Market structre of tesco include pricing and output

oligopoly characteristics

Such laws may include age discrimination, increase in minimum wage etc. The demand curve is relatively inelastic in this context. The four-firm concentrationratio for most manufacturing industries in the United States is between 20 and 80percent.

oligopoly barriers to entry

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Market structure and pricing practices

However, in , a price increase announced by U. An industry in which the four-firm concentrationratio is close to is clearly oligoplistic, and industries where this ratio is higherthan 50 or 60 percent are also likely to be oligopolistic. Will rivals be able to copy the strategy? OFT gathers intelligence about markets and trader behaviour from a wide range of sources and then they respond to complaints about markets from nominated consumer bodies, where the OFT is able to see potential problems, the OFT undertakes market studies and recommends to take action respectively. In dominant price leadership, the largest firm in the industry sets the price. Another organisation that does similar commerce to what Office of Fair Trading do, Ofcom is an independent regulator and competition authority, for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services. Superior knowledge An incumbent may, over time, have built up a superior level of knowledge of the market, its customers, and its production costs. Such laws may include age discrimination, increase in minimum wage etc. Environmental factors include a change in weather, climate.

Ownership or control of a key scarce resource Owning scarce resources that other firms would like to use creates a considerable barrier to entry, such as an airline controlling access to an airport. As the companies are bound to follow market prices the only way the company can have advantage over its competitors is by reducing its operating costs and working at optimum level of efficiency Monopolistic competition: Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.

Oligopoly short run and long run profit

Furthermore, by squaring the market share ofeach firm, the Heirfindahl index appropriately gives a much large weight to largerthan to smaller firms in the industry. Accordingly, there are different kinds of output and pricing decisions which take place. Will rivals be able to copy the strategy? In some countries this kind of collusive agreement is illegal e. If the product is differentiated, we have a differentiated oligopoly. Steel was the leader in setting prices in the steel industry. One model explaining why oligopolists tend notto compete with each other on price, is the kinked demand curve model of PaulSweezy. Kinked demand curve The reaction of rivals to a price change depends on whether price is raised or lowered. This points to the advantage of the Heirfindahl index over theconcentration ratios discussed above. The business that I have chosen for this assignment is Tesco; this is because Tesco is a multibillion pound international business. Under the European Union the members can travel and trade freely without any constraints as long as the members are trading in euro the single European currency. The Heirfindahl index has become of greatpractical importance since when the Justice Department in the US announcednew guidelines for evaluating proposed mergers based on this index. In another market oligopoly, pricing is a bit more complicated and it depends upon the strategic interaction among the firms. In this type of industry firms usually follows pull strategy and make huge efforts in marketing and advertising to attract its target customers, the products in the industry could be highly differentiated or even be similar but hard of getting a hold and this is why businesses use branding or homogenous. At price P, and output Q, revenue will be maximised.

Will rivals be able to copy the strategy? The EU has developed a single market system of laws which apply to all member states, and ensures the free movement of people, goods, services, and capital, including the elimination of passport controls by the Schengen Agreement between 26 European Union states which I have listed below.

pricing and output decisions

The super-normal profits they generate may be used to innovate, in which case the consumer may gain.

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Pricing under monopolistic and oligopolistic competition