Consider the cellular network market. What type of market would this fall under (price taker, price...

Consider the cellular network market. What type of market would this fall under (price taker, price searcher, etc.)? Does this type of market necessarily mean that consumers are worse off (either pay more or are subject to low quality products)? Explain.

Expert Solution

The cellular network market is the monopolistic type of market structure in which the seller is able to influence the price by little amounts through differentiation and the firm is not a price taker.

There are very less barriers on the entry and exit of the firms and the firms are very close substitutes due to which the demand is highly elastic. The price differentiation occurs due to the different schemes by different companies due to which they are in a position to influence the price in the market.

But it will be wrong to say that the consumers are worse off in this type of market. Due to the large number of seller and the buyers there is availability of large number of close substitutes of the products. So if the seller raises the price to the extent which is not agreed by the consumer they will shift their service consumption to another operator because their services vary with very small amounts of the cellular companies.

If they feel that the services offered are of the low quality then too they will shift their consumption to another seller.

Rahul Sunny answered 1 year ago

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