Econ: Marketing Segments

Market Structure and Pricing Strategies

Abstract

In today’s economy there are four types of market structures which all firm activity falls. This paper introduces each of the four market structures; perfect competition, monopolistic competition, oligopoly and monopoly. It also highlights the pricing strategies for each, as this strategy is the most significant determinant of how firms will fare in terms of their respective market structures. It is of paramount importance for each firm in its industry to know which type of market structure they are competing (or in some cases not competing) in. A firm cannot properly build business and functional level strategies without a clear vision of how to set prices for their products and best serve their customers. There are certain criteria that must be met in order for a firm to be considered belonging to one market structure over another; the businesses finances act differently according to where it falls. This paper also contains a brief case study examining how Bell Telephone acted as a monopoly in the late 19th and most of the 20th centuries. The case study contains Bell’s rise and ‘fall’ from monopoly.  

Methods

On the far end of the market structure spectrum lies perfect or pure competition. This structure is an economic market that exists mostly in theory. Since most businesses offer some differentiation, no matter how small, perfect competition is not a popular market segment. It is generally used in business as a benchmark for the three remaining market segments. Perfect competition means that consumers will have no preference of one firm’s product over another and the firms cannot sell their product above the market price for the product for that reason. If neither product is seen as superior, nor a difference in application or use, then consumers will not pay a premium for the same product. According to Ivestopedia, there are five factors that a market must have to be considered a perfect...