Deliverable 5 – Best Market Structure for a Pipeline to Function In Comment by Chavarria: For Deliverable 5, you were asked to submit a 2 page report detailing the current market structure and the anticipated market structure after the pipeline is built. You were also asked to include tables to show the characteristics of each of the above market structures and where our firm conforms or does not conform to the characteristics of the different market structures. Finally, you were asked to explain the impact on price and quantity and any pertinent changes to the firm’s pricing strategy after the change in market structure. Below you will find detailed comments regarding how your work was graded. Please correct the following:Anticipated Market StructureCurrent Market StructurePricing StrategyPlease let me know if you have any additional questions regarding how your work was graded. Marlo
Currently, the market structure that exists in the oil industry is a monopoly type of market structure because there is only one big firm that is serving the industry and for this reason it has no competition at all and in turn the prices set by this company seem to be very high for the consumers (Geras’kin, & Chkhartishvili, 2017). This is an advantage to our company because when we establish our company at this particular place then it means that we will be the second company in this industry and thus will be able to compete with the current company in the industry and in the future if we set our goals straight as a company we will be able beat the competitive company and thus acquiring the market for ourselves. Comment by Chavarria: NEEDS REVISION: You were asked to provide an accurate explanation of the current market structure, using clear examples and well-defined reasons for proposal recommendation. Your response is inaccurate since oil companies always exist in market structures that are heavily concentrated, producing a good that reflects inelastic demand.
After the establishment and development our company in this current market structure, it will definitely change the market structure from monopoly type of market structure to oligopoly type of market structure because it will consist of two companies that are competing against each other. Comment by Chavarria: NEEDS REVISION: You were asked to provide an accurate explanation of the anticipated market, using clear examples and well-defined reasons for proposal recommendation. The future market structure assumption is inaccurate since the single pipeline would assume 1 firm in complete control of the pipeline production market.
Monopoly Market Structure
Oligopoly Market Structure
Characteristics of the above two market structures
|There is lack of a substitute or substitutes.||The companies enjoy a monopoly type of power amongst themselves.|
|Barriers to the market entry by other companies.||There is interdependence amongst the companies in the market.|
|There is no competition in the market.||There are only a few companies in the market.|
|The monopoly company is the only one to decide on the prices of the items.||A large number of customers in the market.|
|The company enjoys all the profits by themselves.||There are conflicts amongst the companies in the market.|
According to these characteristics, our company conforms to the monopoly characteristic that states there will be a barrier to market entry and this is because the monopoly company that is already in the industry will not easily allow as into the market and thus we will have to come up with a better strategy that will make this easier for us as a company. Comment by Chavarria: NEEDS REVISION: You were asked to provide an accurate explanation of changes to price, quantity, and pricing strategy , using clear examples and well-defined reasons for proposal recommendation. Please revise this portion of your response to reflect the explanation of changes to price, quantity, and pricing strategy as it relates to the correct Market Structure.
After we have established our company in this new market and taken the opportunities that have presented themselves then it means that we will have to reduce our prices and also produce our products in bulk so that we can beat the competition that is already in the industry by the existing company (Li et al., 2017).
Oligopolistic is a type of market structure that has a few competing companies in the market and thus our company will have to take advantage of this because at this particular point there is only one company in the market and if we take this opportunity we will be the second company in the market. That means we have a chance of being competitive and beating the competition from the other company so that we can make a lot of profits than the current company. But still, this will take a lot of hard work in order to beat the competition from the other company because they are the first company in this market and thus they have already acquired the trust from the customers.
Geras’kin, M. I., & Chkhartishvili, A. G. (2017). Structural modeling of oligopoly market under the nonlinear functions of demand and agents’ costs. Automation and Remote Control, 78(2), 332-348.
Li, Y., Nie, D., Zhao, X., & Li, Y. (2017). Market structure and performance: An empirical study of the Chinese solar cell industry. Renewable and Sustainable Energy Reviews, 70, 78-82.
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