Market Structures

Differentiating Between Market Structures

Introduction

Economically, there are four major market structures in the world, competitive market structures, monopolies, monopolistic market structures, and oligopolies. In this case, the essay will focus on Coca-Cola industry and try to analyze its behavior in the context of the four market structures named above. Arguably, Coca-Cola operates in a monopolistic market stricture where there are fewer major producers, and many consumers. Globally, there are other soft drink manufacturers such as Pepsi, and Dr. Pepper drinks, with many other soft drinks manufacturers in countries around the world. The market structure in which Coca-Cola operates is not self-regulating, and a few firms can dictate the overall market price (Stackelberg, & Hill, 2012). Meaning, consumer choices are limited. For this reason, this assignment will analyze the competitive strategies of Coca-Cola Company in the four dimensions, as both a competitive firm, an oligopoly, a monopolistic firm, and a monopoly.

Coca-Cola in a Competitive Market Structure

When discussing Coca-Cola in the perspective a competitive market structure, an economist sees it in the light of a firm operating a market with many buyers, as well as many sellers, and that there is the aspect of free market entry, and free market exit by all firms. In this case, an economist assumes that Coca-Cola Company is one of the many small producers selling for the same market (Stackelberg, & Hill, 2012). Economists also assume that the firm in question can dictate on the price of the products, but lets the market dictate on the commodity prices. Given the conditions above, Coca-Cola Company takes the prices of the commodities as given by the market. This implies that for the firm, the average revenue (AR), the price (P), and the average cost (AC) are equal in a perfectly competitive market.

Therefore, because Coca-Cola company is a price taker in a perfectly competitive market, it is...