Question

The final four chapters of this course cover the 4 market structures: perfect competition, monopoly, monopolistic competition, and oligopoly.  

For this discussion, you are to choose a business and explain, in detail, in which market structure they belong.  Be sure to include the following:

• Is it easy or difficult to enter the market? Is it easy or difficult to exit the market? Why or why not?
• What type of product or service do they provide - unique? homogeneous? differentiated?
• Do they have competitors? If so, who? If not, why not?
• Are they price takers or price makers?
• Do they differentiate themselves from their competitors (if they have competition). How do they differentiate (for example, customer service, location, quality, etc.)

Your initial post should be at least 250 words. Be sure to include references and citations for any information you included. Opinions are welcomed, but make sure they are "educated" opinions with resources to back them up. Post directly into the text area (do not attach files unless they are supplementary material).

Answer 1

The business of wireless carriers

The combined market share of the four major wireless carrier companies in the U.S.—Sprint-Nextel, T-Mobile, Verizon, and AT&T—is over 98%. In this highly-concentrated industry, certain practices that are unfriendly to the consumer have become the norm, including termination fees and sneaky overage charges. The majority of consumers are locked in contracts with one of these four companies, and there is very little recourse for this oligopoly behavior.

Thus, the Market Structure they belong to is called Oligopoly because there are only 4 large players.

It is difficult to enter this market and compete as a small start-up company. The existing firms are large and benefit from economies of scale. It takes considerable know-how and capital to compete in this industry. At the same time, exit is also fairly difficult as a lot of money is invested in such a business of each of the players.

The product provided is partially differentiated because of the additional services being provide by each of the competitors. Some provide additional content, while others may incentivise by providing a phone etc. Otherwise the core product is the same for all the competitors.

There exist only four major players thus making it possible for them to collude and keep the prices high. This is the very nature or strategy in an oligopoly market..

It is usually with collusion that they set the price in the market. Thus, all of them can be called to be following each other's moves. Mostly one of them sets the price and other follow the same. Thus, they all are price makers only.

They differentiate themselves from their competitors by targeting the different users and utilizing their current technological advances, large customer base, and large infrastructure of distribution centers. They also provide incentives for handset vendors, platform vendors, and content providers in order to capture the capabilities and create value in their network . Also, the competitors differentiate between themselves by prevalent advertising. These firms frequently advertise on a national scale.