Market Structure Analysis

Market Structure Analysis

Market Structure Analysis
A firm can make more effective pricing and production decisions when it has a solid understanding of the industry it functions in. Four market structures exist in economics – pure competition, pure monopoly, monopolistic competition, and oligopoly. These structures can be compared by five different characteristics. The five characteristics are the number of firms in the industry, the amount of control over price held by the firm, the type of product, the conditions of entry into the market, and the amount of nonprice competition. The characteristics of each of these market structures have different affects on our economy and should be managed in a different manner. The following text will outline these various characteristics and provide a narrative on their impact in the different markets. Concurrently an analysis of the five different characteristics is made for five different firms in the respective market structure. Finally, each firm will be ranked in terms of competitiveness based on the analysis of the five characteristics.

Market structures
The market structure of military logistics (military publications and provisioning) is shown in table 1. The companies in this market are oligopolies. Few military logistic companies perform a differentiated service as their primary business. As oligopolists, these companies have some control over their pricing but must be cognizant of the reaction of competitor pricing, output, and advertizing. (McConnell & Brue, 2004, p. 467) All the firms set their prices but their pricing is interdependent on other firm’s pricing. Since all the firms perform work with the military, they compete for work with the government. As such, these companies are interdependent on the other firm’s pricing. Many firms try to enter, but successful entry is difficult because of the military standards to which the companies must comply. Finally, the firms practice...