Question

find an example of a product produced by an industry that operates in a monopolistic, monopolistic competitive ,or olipogolistic mart
a. indicate the product and type of market structure
b. support your choice of industry by giving evidence about:
I. the number of firms in the industry ( provide link where information can be found)
ii. the four- firm concentration ratio( provide link wher information can be found)
c. whether the product is standardized, e plain

Answer 1

A product produced by an industry that operates in a monopolistic, monopolistic competitive ,or olipogolistic mart :

Monopolistic Competition

A monopolistic competition constitutes a type of market which combines the different characteristics of a monopoly market and a market with perfect competition. This implies that in a monopolistic competition, there are multiple players or competitors like perfect competition markets. The key difference lies in the fact that an individual competitor differentiates himself from the other players. This can be done by charging higher prices or by offering varied services.

Instances of monopolistic competition may be seen in the books industry. There are multiple writers, but each writer differs his product from others. This also implies that there work is not easily substitutable by another.

oligopoly:

An oligopoly market is in many ways similar to a monopoly market. This is because of the presence of goods that are almost standardized in nature. The main difference that exists between a monopoly and oligopoly is in the number of market players. Unlike monopoly that has only one play or producer of a good or provider of service, in an oligopoly, there are a multiple but a limited number of producers that make up for a major part of the market system.

In an oligopolistic market, the producers are limited. However, the pricing power is not similar to that in a monopoly. They cannot price the product unreasonably. However, in the absence of government intervention and regulations, the players in an oligopoly market may collude. This implies that they together may determine and set prices and control them like in a monopoly.

Example of oligopoly: The Indian airline industry is an example of classic oligopoly market structure. The number of players is limited. Along with this, the types of goods and service offered are almost standardized. Lack of product and service differentiation ensures that the prices are controlled. The players have an almost equal market share and can collude and set prices in the absence of regulations.

Cereal Industry:

Ireland & UK, Market Structure: Oligopoly

Industry: Cholesterol-lowering food

Incumbent competitors & relative strengths

Oat varieties categorized on the basis of composition of lipids & proteins; may be mass market, or, niche products
The impact depends on the percentage of beta glucan in oats
Incumbent competitors

Nestle
Kellogg's
Flavahan's
Weetabix's
Odlums
Competitor's strengths

Industry: Cereal Industry; market structure: Oligopoly
Categories: Read to eat (RTE); and, hot breakfast cereals
Key drivers of the market & competitor's strengths:
Product differentiation;
creative advertising;
Economies of scale
Contracts for raw materials
Reformulation of nutritional ingredients
Market: UK & Ireland

Kellogg's : Clearer brand identity; good customer experience; advanced machinery for packaging & production
Flavahan's & Odlums: Niche players; value addition for successful product lines; expanding breakfast cereal market in Asia;
Nestle: Targets the market for Children
Kellogg's - Market Leader - mass market, economies of scale, lower prices - Higher consumer and product surplus

Nestle, and, Weetabix - Followers; Learn from the leaders' competitive advantage; prices higher initially; come to the same level later; Consumer & producer surplus increases with increase in sales; initially lower in comparison to a purchase from the market leader

Flavahan's & Odlums - Niche players; higher prices on differentiated products; lower consumer surplus considering the willingness to pay for the product category; high producer surplus;

200 million Euro Cereal industry; profitability - 40 to 45 percent

The products are standardized but each firm creates a line of products with slight differences in variants.

Ireland, US, UK - 3 firm, four firm concentration in 1990s, 2000s, and, now - The concentration has not changed. The changes are -/+ 2.

US - Kellogg, General Mills, Ralcorp, Quaker - 80 percent of sales

There is high degree of concentration in the global breakfast cereals industry. The prices substantially exceed the costs firm incur. The dominant firms are using a tacit collusion cooperative strategy.

3 Firm ratio in Europe

Ireland - Breakfast Cereal - 92

UK - 65

HHI can be used for calculating market concentration. It is calculated by squaring the market share of each firm, and, summing the resulting numbers. The data for share in market revenues is easily available

monopolistic characteristics:

Monopolistic market is characterized by a market where there is no competition and it can charge high price because of it. There is very large barrier for entry of any new player.

For example: Windows operating system of Microsoft is kind of an example of Monopolistic market. There are various operating system like Linux and OS X operating system of Apple which are available in market but windows alone fetch 90% of the market share. Windows operating system is also an standardized product. Four firm concentration ratio talks about a condition in which 90% of industry is captured by four largest firms.

Oligopolistic market :

Oligopolistic market is characterized by a condition in which there is moderate competition. There is still significantly large barrier for entry of any new player. For ex:- In US, oligopoly exist in commercial air crafts segment. Boeing and Airbus are perfect example of it. Another example could be in soft drink segment. The two major player are Coca Cola & Pepsi Co. There are very high barriers for any new entrant to enter these markets and challenge the established players. The products are standardised as per regulator.