Question

Discuss about the Price strategy of the company in context of imperfect competition.

Answer 1

Meaning of price strategy- it refers to the method adopted by the firm to establish the best price for a product or service.it helps to select a price to attain maximum profits, to meet demand keeping in mind the consumers.

Meaning of imperfect competition-

It is a market situation in which large no.of sellers are selling heterogeneous goods or in other words it refers to the situation of market failure in which the law of demand and supply cannot determine the prices.in this type of market the seller can influence the price in order to earn profit.

There are 4 types of imperfect markets

1- Monopoly( one seller or single seller)

2- Oligopoly(few sellers)

3- Monopolistic competition( many sellers with differentiated products)

4- Monopsony( only one buyer of product)

Price strategy of these markets are discussed below-

1- Monopoly- under this type ofmarket structure the price can be easily due to the absence of competitors.monopolist always set the price in such a way that it wouldn't loose its customers due to change in price strategy or they started substituting the goods due to price.rise in price will lead to less sale and result in fall in price.

2- Oligopoly- under this type of market ,there are few sellers and the firms are dependent on each other for quoting price.the company can affect the market price but cannot contol the whole market.

3- Monopolistic - under this type of market the prices are set up by the companies.since there are large no.of buyers and sellers but the firm can set the price as it depend on the quantity they desire to produce.company will have control over their own price.

4- Monopsony- since there is single buyer of a commodity or service the same pricing strstegy is applied as its applied in monopoly case.

In short,pricing strategy differ in imperfect competition.