Running Head: Market Structures

Differentiating between Market Structures Simulation
University of Phoenix
ECO 365
08/19/2013

There are many advantages of the supply and demand forces on the market and the way it operates. An important advantage is their market regulating utility. They help encourage competition and charge more and therefore make bigger overall profits. Consumers are willing to pay more for better products even though this trend differs in other market structures. One of the major limitations of supple demand forces is a socially undesirable outcome as in the case of a market structure that is characterized by monopoly. This is where one single firm will control all production resources and therefore has exploitative capabilities in the terms of pricing and promoting. One example can be that of an electric company that has a virtual monopoly over production resources of a specific region and charge whatever prices they want. Coca Cola Co. is ran in a beverage industry that is highly concentrated oligopolistic. They compete directly with another major company, Pepsi Co. These two companies hold over 98% of the beverage market in all of the United States. Both Coca Cola Co. and Pepsi Co. compete globally don’t have much competition knocking on either of their doors. Cadbury-Schwepps owns the remaining 2% of the US market share but it’s a struggle for them to try and expand share as well as getting more attention. Oligopolistic market structure is multiple companies that operate in a competitive environment having high influence over the pricing of each other. It’s made up of high barriers to entry, high price sensitivity, kinked demand curve, and cartels. It’s typical that capital-intensive industries will lean toward oligopoly. Being that there are multiple companies in an oligopolistic market structure, product