This document discusses nonprice competition in imperfectly competitive markets. It defines nonprice competition as efforts by firms other than price changes to affect demand for their product through factors like advertising, promotion, location, and product development. These nonprice variables are anything a firm can control to influence demand. The document also discusses monopolistic competition, where many small differentiated firms operate with free entry, and oligopoly, where a small number of large, strategic firms dominate a market with fewer restrictions on entry. It provides examples of industries that blur the line between these market structures.
This document discusses nonprice competition in imperfectly competitive markets. It defines nonprice competition as efforts by firms other than price changes to affect demand for their product through factors like advertising, promotion, location, and product development. These nonprice variables are anything a firm can control to influence demand. The document also discusses monopolistic competition, where many small differentiated firms operate with free entry, and oligopoly, where a small number of large, strategic firms dominate a market with fewer restrictions on entry. It provides examples of industries that blur the line between these market structures.
This document discusses nonprice competition in imperfectly competitive markets. It defines nonprice competition as efforts by firms other than price changes to affect demand for their product through factors like advertising, promotion, location, and product development. These nonprice variables are anything a firm can control to influence demand. The document also discusses monopolistic competition, where many small differentiated firms operate with free entry, and oligopoly, where a small number of large, strategic firms dominate a market with fewer restrictions on entry. It provides examples of industries that blur the line between these market structures.
This document discusses nonprice competition in imperfectly competitive markets. It defines nonprice competition as efforts by firms other than price changes to affect demand for their product through factors like advertising, promotion, location, and product development. These nonprice variables are anything a firm can control to influence demand. The document also discusses monopolistic competition, where many small differentiated firms operate with free entry, and oligopoly, where a small number of large, strategic firms dominate a market with fewer restrictions on entry. It provides examples of industries that blur the line between these market structures.
▪ Definition: Any effort made by firms other than a change in price of the product in question in order to change the demand for their product.
▪ Efforts intended to affect the nonprice
determinants of demand. Nonprice Determinants of Demand Any factors that causes the demand curve to shift. ▪ Tastes and Preferences ▪ Income ▪ Prices of substitutes and complements ▪ Number of buyers ▪ Future expectations ▪ Financing terms and conditions Nonprice Variables ▪ Any factor that managers can control, influence, or explicitly consider in making decisions affecting the demand for their goods and services. ▪ Advertising ▪ Promotion ▪ Location ▪ Market Segmentation ▪ Loyalty Programs ▪ Product extensions and new product development ▪ Special customer services ▪ Product lock-in or tie-in ▪ Preemptive new product announcements The Reality of Monopolistic Competition and Oligopoly: Imperfect Competition Monopolistic Competition: ▪ Large number of relatively small firms ▪ Differentiated product ▪ Competitive pressures ▪ Free entry and exist Oligopoly: ▪ Small number of relatively large firms ▪ Homegenous or differentiated product ▪ Few restriction to entry and exist ▪ Their size and domination of market also make it imperative for them to watch each other closely when setting their prices.
▪ Distinction between monopolistic competition
and oligopoly can sometimes be blurred in actual markets. ▪ The American automobile industry: in the early 1970s, General Motors held more than 50 percent market share and you will probably find the American automobile market as a prime example of an oligopoly.
▪ The increasing dominance of
Japanese, German, and, more recently, Korean automakers in the U.S. market make it hard to argue that entry is difficult in this market. ▪ Small retail establishments around the world: A frequently used example of monopolistic competition is the retail industry, but the competitive landscape of the retail business has changed dramatically in the United States over the past several decades.
▪ Global issuers of credit cards: monopolistic competition or oligopoly?
• On the surface, the credit card
industry appears to be an oligopoly dominated by Visa, MasterCard, American Express, and Discover.
• Visa and MasterCard each have
thousands of members, most of whom are banks. This would indicate monopolistic competition.