Market Structures: A Memo Point

Market Structures: A memo

Point a:

Over the course of a product life cycle, a firm, as noted in the simulation regarding market structures, will move through a sequence of monopolistic, oligopoly-like, monopolistic competition, and pure competition. As it does, the profit opportunities diminish for the firm as competition drives down the price of the good in question. One way for the firm to prolong its profitability is to take note of pricing advertising, technology, and other investment proposals. Pricing a product low, and taking advantage of offering a lower price than one's competitors can increase the firm's profits, as the volume of sales increases. Building a stable brand image can distinguish one's product from one's competitors in a competitive market, and can even allow a firm to price its product higher than its competitors, if the branding is sufficiently memorable. Innovating and creating a new or better product through technology, or becoming a first mover in foreign markets is another way to create a new 'monopolistic' situation that is advantageous for the firm.

Point B:

Still, firms that operate in an oligopoly-like market must take into consideration how the firm's competitors will react to their price and output decisions. Besides pricing, creating a unique brand image of appeal to a loyal and core market of target consumers, or using directly comparative advertising against one's major competitors are excellent ways to ensure that price and output levels alone to not govern the market.

Point C:

Based on personal experience, one additional strategy and variation on the other given strategies is to examine the growth in Real GDP. When the GDP increases, a firm is likely to have enough extra capacity to increase production and sales and launch new products. Or, it can control its production and bide its time when the economy is in a recession.