MARKET STRUCTURE:
DEFINITION:
The interrelated characteristics of a market, such as the relative strength & number of buyers and sellers, degree of collusion among them, competition forms & level, extent of product differentiation, and conditions of entry and exit.
TYPES OF MARKET STRUCTURE:
I. Perfect Competition
II. Monopoly
III. Monopolistic Competition
IV. Oligopoly
PERFECT COMPETITION:
Features:
• Large number of firms.
• No barriers to Entry and Exit; low sunk costs required.
• Identical / homogenous product produced by all firms
• Perfectly elastic demand curves for all firms.
• Knowledge & information are perfectly disseminated.
Examples of Perfect Competition:
Foreign Exchange Markets: Homogenous currency. Traders have access to
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As number of firms increase, residual demand elasticity, nε, a single firm will have to face, becomes larger accordingly. As n becomes very large, the residual demand elasticity tends to approach negative infinity , & the equation becomes which is the profit-maximizing condition of a price-taking competitive firm.
STACKELBERG MODEL:
This model is similar to Cournot model but output setting happens in a sequential manner. The follower observes the leader’s output and sets its own output level.
Solving Stackelberg Game:
• Using backward induction, starting at setting price to clear the market.
P = a - b(qL + qF )
• Now the follower decides quantity to maximize his profit given the leader’s choice.
F = (a - b(qL + qF ) - c) qF
• Take the derivative and set it to 0 to get BR,
a - bqL - 2bqF - c = 0
qF* = (a - bqL - c)/2b
• Now we go to the first step, the leader decides output to maximize his profit
L = (a - b(qL + qF ) - c) qL
• But then, the leader understands the way the follower will respond. So the leader can figure out the follower’s BR. This leads to
L = (a - b(qL + (a - bqL - c)/2b) - c)
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GAME THEORY:
It is the process of developing models to study the strategic interaction between two or more players placed in a situation characterized by set rules & outcomes.
• Cooperative Games: Games Characterized by use of binding contracts
• Non Cooperative Games: Games devoid of binding contracts
Dominant Strategy:
An optimal strategy adopted by firms irrespective of what rival firms are doing. If a player has a dominant strategy than all others are dominated, but the converse is not always true. A strictly dominant strategy is always played in equilibrium, and thus strictly dominated strategies never are.
Dominated Strategy:
A strategy is dominated if, regardless of what any other players do, the strategy earns a player a smaller payoff than some other strategy. Hence, a strategy is dominated if it is always better to play some other strategy, regardless of what opponents may do.
Neither Dominant nor Dominated
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
The strength or weakness of each competitive force in the model will determine the overall attractiveness of a market. The diagram below (adapted from M. Porter, Competitive Strategy CH.1) shows in simple form the five forces, which can be seen as determinants of industries profitability.
They are both very powerful tools for team skill building. When team members can identify with the models and learn to move through each stage successfully, it can set organizational standards to new highs. Every business professional should want to keep a copy of these models on his desk because of the growing dependence of teams in organizations. After all, no one wants to be on the losing team. The ineffective team gives no pleasure or feeling of accomplishment to anyone involved!
D2 followers will require a high directive and a high supportive behavior from their leader. The leader will still be required to make the decisions and provide direction but will also seek out input from the follower. Seeking out input and involving the follower in the planning will not only get them involved, but will also raise their level of commitment. The leader will also need to provide support as the follower is learning as well as praise to help increase their confidence.
The aim of this approach is to clarify how leaders balance these two behaviors in order to lead
The leader by its meaning is one who goes first and leads by example and then the other will followed him after being motivated. The above diagram can be explain as; with the three combinations, the person or the leader will influence the other people or the follower to achieve the purpose or goal. In order to achieve the goal, the leader must have a deep rooted commitment to the goal that he will strive to achieve even if nobody follows him (Wong, 2007). The follower also can influence the leader in order to achieve the goal.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
As it were, Strategy management is the procedure of indicating an association's goals, creating strategies and arrangements to accomplish these destinations, and apportioning assets in order to execute the arrangements. It is
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
The theory reduces the expectations from the leader, instead focuses on matching the leader to a task
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
The manner in which leader’s decide to follow, indicates, precisely how the follower’s will respond and or react in reaching the goals, the implications involving their perceptions of the leader, will then in turn impact their willingness and desire to follow (pg., 4. Par., 3).
meanings as the most important long-range planning, the most complex. and profound decisions, and the most advantageous effects from a. bombing campaign as well as leaders with the highest conceptual ability to make decisions and make decisions. As mentioned earlier, strategy is a plan whose aim is to link ends.... ... middle of paper ... ...
...process. Strong leaders seek the input of others in their organization, and strong followers seek to contribute whenever possible and appropriate.