Use the link below to watch the video:
Reply to these prompts using the company for which you currently work, a business with which you’re familiar, or a dream business you want to start:
***With your selected business in mind, determine if it is competitive, monopolistic competitive, an oligopoly, or pure monopoly. Explain how you drew your conclusion about its market structure.
***How does the business/firm in this industry determine the price it will charge for the products or services it sells?
Economics Week 4 Discussion
One of the companies that operate as an oligopoly, Microsoft, has maintained its status for a long time. Initially, Microsoft operated as a monopoly, but its market dynamics changed and turned it into an oligopoly. I believe Microsoft is an oligopoly since only a few firms operate in its market. In its case, Microsoft only competes with a few companies, including Ubuntu and X Lion. Microsoft’s market also sees a few companies hold a huge market share. With the few competitors in the Operating System (OS) market, companies such as Microsoft command large market shares to control pricing and branding as they wish. However, the market share depends on the number of firms and the size of the market. Microsoft also operates in a market characterized by high entry barriers, interdependence between operating firms, and a more efficient market than the perfect competition market structure. For example, the OS market supports an interdependent market with companies depending on each other to run successfully. Additionally, it may be practically impossible for a new entrant to succeed in the OS market due to issues with patents, loyalty, and start-up costs.
Microsoft determines its products’ prices depending on the demand curve. Companies set prices and lower or increase them in an oligopolistic market depending on other firms’ pricing. For instance, if Microsoft increases its products’ prices, it will see the other companies maintain their prices. The action will see Microsoft lose possible clients. On the higher end of price, the company can only set prices to match other companies. However, if Microsoft lowers its products’ prices, other companies in the oligopolistic market will follow suit and lower their prices. If other companies lower their prices, Microsoft will lower its products’ prices to avoid losing a market share. As a result, Microsoft sets its products’ prices depending on other companies’ price levels.
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