Final Thoughts

It's time to wrap up this little learning session we have been having. To finish this off I have just a few visual aids to cover the four market structures.

To begin with, a chart covering most quick need to know ideas.

Market Structure	Perfect Competition	Monopolistic	Oligopoly	Monopoly
Number of Firms	Many	Several	Few	Just One
Freedom of Entry	Unrestricted	Unrestricted	Restricted	Restricted or Blocked
Nature of Product	Same	Varied by Service/Product	Similar	Exclusive
Implication for Demand Curve	Flat	Elastic	Inelastic/ Kinked	Very Inelastic
Average Size of  Firms	Small	Small	Large	Industry
Possible Consumer Demand	Unlimited	Demand = Average Revenue	Driven by Competitors	No Choice
Profit Making Possibly	No Economic Profit	Short Run Profit Possible	Dependant on Competitors	Maintained Profit
Government Intervention	None	Between Minor and Nothing	Moderate	Highest Level
A New Example	Buying Lobster at the Dock	Vietnamese Soup House	Automotive Industry	FortisAlberta Electricity Distribution
Relationship Between Firms	Indifferent	Competitive	Competitive/ Cooperative	All Alone

Now for the charts, I'll start it off simple with the perfect competition. There isn't and economic profit above and beyond normal profit and firms operate at peak efficiency.

After perfect competition comes the monopolistic structure. This graph illustrates the concept that monopolistic firms have the ability to make economic profit in the short term but over the long term the change in demand has an adverse affect on profit.

Oligopoly chart I've drawn out is one with a kinked demand curve. This is where if a firm raises prices other firm don't follow and they lose market share. If they lower prices other firms will be forced to follow and everyone will lose profit. In the mean time that it doesn't have a large control over pricing the firm is still earning a economic profit.

To conclude this we have the monopoly chart. Monopoly firms are able to earn a long term profit and usually unless there is government intervention will run at profit maximizing quantity over a quantity preferred by customers. The steeper demand curve shows that a monopoly has more control over pricing.

aSGuest35240. (n/a). authorSTREAM. In pricing. Retrieved June 2, 2012, from http://www.authorstream.com/Presentation/aSGuest35240-300725-pricing-entertainment-ppt-powerpoint/.

Oliogopoly

Ok, lets answer some questions on oligopolies. In the market structure these fall just below monopolies, as they are not just one firm but the compilation of a few large firms with the majority of the market share. These companies are co-dependent on each other for pricing and should be pushing each other for development. whether or not this is how it happens for a particular firm seems like closely guarded company secrets I'm sure.

In Canada the worst offenders would be the cell phone companies. We pay some of the highest rates in the world for sub par service. it was nothing more than a change in definition of 3g service that allowed Canadian cell phone companies to say they had 4g. The difficulties endured by Wind Mobile as they tried to enter a market dominated by the big three shows to the oligopoly system in Canada. As stated by Wind Mobile since they have entered the market it has driven the plan prices down 30%. This shows that the big three were doing alright just hanging out and splitting up the Canadian market fairly evenly, while making good economic profit while being horribly inefficient.



Gary. (November 18, 2011). iPhoneinCanada.ca. In WIND Mobile Regrets Entering 'Protected' Canadian Mobile Market. Retrieved June 1, 2012, from http://www.iphoneincanada.ca/carriers/wind-mobile-financier-regrets-entering-protected-canadian-mobile-market/.

Nowak, P. (August 11, 2009). www.cbc.ca. In Canadian cellphone rates among world's worst. Retrieved June 1, 2012, from http://www.cbc.ca/news/technology/story/2009/08/11/canada-cellphone-rates-expensive-oecd.html.

Monopolistic Competition

Monopolistic competition, going to break this down to layman's terms. Monopolistic competition is one of the four possible market structures, the other three are perfect competition, monopoly and oligopoly. In monopolistic competition there are many firms in an industry without any clear leaders, also its is an easy industry to enter, firms sell similar products and the consumer has good knowledge base. Although this is similar to perfect competition there is few discrepancies and it is here where firms can stand out. Firms can use product differentiation whether it be advertising, location, service or physical differences. 


The example I'm going to use is the many Vietnamese restaurants located in the Asian Village in Edmonton. How does one Vietnamese restaurant set itself apart from the others? As you search for some lunch you may use Google on your phone to search for reviews, could use clues from outside appearance, location, local traffic or that you remember Hoa An has the best Pho soup. It will be these differences that allow a firm earn economic profit without reaching product efficiency. 

Starbucks

      Starbucks seems to be quite the success story, following in the steps of many other US companies that have gone global. With having over 19,000 stores open to date and only a small hiccup during the recession closing 600 stores. The closing of these stores was mostly linked to the cannibalization of sales from other Starbucks so it was decided to concentrate on overseas openings. This happens to many of the largest companies, Walmart and McDonald's also reached the point that almost every new store open was going to have a negative effect on nearby stores. Possibly in the long run it'll work out better to work on expansion than concentration. 

If     If your not someone who frequents Starbucks you may be shocked by the general cost of items. you may think how come anyone would pay such prices for coffee? Part of the answer would be taste preference but its also tied to the initiatives of Starbucks to be a responsible company. They are actively reducing energy use, recycling cups and being involved with community volunteering. Even with there stated 86% coffee coming from ethical sources, a quick Google search will reveal many people who state its all just a front for show.  Is it that the company actually cares or is that it has crunched the numbers and knows the payback from looking good will generate the maximum economic profit.

      . (2011). Starbucks. In Goals and Progress 2011. Retrieved June 1, 2012, from http://assets.starbucks.com/assets/c007fb25782442ac8283b154364c1016.pdf.

      Everyone. (2012). Wikipedia. In Starbucks. Retrieved June 1, 2012, from http://en.wikipedia.org/wiki/Starbucks.

      Allison, M. (July 2, 2008). Seattle Times. In Starbucks closing 5 percent of U.S. stores. Retrieved June 1, 2012, from http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html.