Oligopoly The market structure being considered is an oligopoly. An oligopoly occurs when there are “few sellers and interdependent price-output decisions” (Hirschey, 2009, p.500). Only a small amount of companies are responsible for the majority of the industry’s output. Also, it is difficult to enter or exit the industry. Decision making is influenced in an oligopoly by the high rate of competition. Since there are only a few companies in the industry any change will generate an immediate response from the competitors. This means that when a change in pricing, output and advertising occurs from another company our company must also make a change in order to stay competitive. This change will have to occur quickly before one company
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In order for price discrimination to occur there must be a very high demand for the product or service and the highest amount that a consumer will pay needs to be known. Price discrimination occurs in the market of airline tickets in many different forms. Ticket prices are set a different rates depending on the date of travel. For example, ticket prices raise during holidays because consumers are willing to pay extra in order to visit family or enjoy a vacation since most people are off work around the holidays. This falls under the category of first-degree price discrimination. Price discrimination also, occurs when choosing to purchase goods from a wholesale or retail distributer. In the wholesale market a price reduction occurs when larger quantities are being purchased, which is considered second-degree price discrimination. But, if you purchased only one single product from a retail store the price will be more. For example, if I purchase forty rolls of paper towel from a wholesale distributer the price per item could be two dollars, but when I purchased one single roll of paper towel at a retail store the price per item could be four dollars. Even with the purchase of Movie Theater tickets price discrimination occurs. The price of movie tickets vary depending on the age of the consumer. This is considered third-degree price discrimination. Usually children and senior citizens tickets are cheaper than an adult ticket. This is price discrimination since there is not one set price for all individuals. Also, discount coupons are a form of third-degree price discrimination. The individuals with a coupon will receive the good or service at a cheaper rate than those without the coupon. Even though price discrimination can seem unfair it can also be provide a wider availability of consumer goods and services (Hirschey, 2009, p. 590). An, example of price discrimination as a
In order for price discrimination to occur there must be a very high demand for the product or service and the highest amount that a consumer will pay needs to be known. Price discrimination occurs in the market of airline tickets in many different forms. Ticket prices are set a different rates depending on the date of travel. For example, ticket prices raise during holidays because consumers are willing to pay extra in order to visit family or enjoy a vacation since most people are off work around the holidays. This falls under the category of first-degree price discrimination. Price discrimination also, occurs when choosing to purchase goods from a wholesale or retail distributer. In the wholesale market a price reduction occurs when larger quantities are being purchased, which is considered second-degree price discrimination. But, if you purchased only one single product from a retail store the price will be more. For example, if I purchase forty rolls of paper towel from a wholesale distributer the price per item could be two dollars, but when I purchased one single roll of paper towel at a retail store the price per item could be four dollars. Even with the purchase of Movie Theater tickets price discrimination occurs. The price of movie tickets vary depending on the age of the consumer. This is considered third-degree price discrimination. Usually children and senior citizens tickets are cheaper than an adult ticket. This is price discrimination since there is not one set price for all individuals. Also, discount coupons are a form of third-degree price discrimination. The individuals with a coupon will receive the good or service at a cheaper rate than those without the coupon. Even though price discrimination can seem unfair it can also be provide a wider availability of consumer goods and services (Hirschey, 2009, p. 590). An, example of price discrimination as a