Differentiating Between Market Structures

Econ 365
2/4/14

In the world today, the cell phone has become an item of necessity, according to the Pew research center “Cell phones are now being used by 91% of adults (Cell Phone Ownership ((2014)). This high demand has had a great effect on the wireless industry but with frequent advances in technology only a few organizations can even keep up. Among those few organizations is Verizon Wireless or Verizon Communications. Verizon is headquartered in New York and provides customers with service in more than 150 countries ("Verizon", (2013)). Verizon has become a leader in the wireless market, providing the nation’s largest 4G LTE network and being the largest U.S. wireless company. Although Verizon leads in wireless service, the organization does compete with three other main wireless carriers; Sprint, T-Mobile, and AT&T. This competition helps us to better understand the market structure at which Verizon competes in, oligopoly. Oligopoly is a market form in which a market or industry is dominated by a small number of carriers. Other characteristics that make us aware that Verizon operates in an oligopoly market structure are; high barriers, interdependence, and non-price competition. There are high barriers in the wireless industry making it difficult for entry for new businesses, this allows only a few carriers to dominate the market. Interdependence is extremely present within an oligopoly market structure, in the wireless market each carrier makes decisions based on other carriers and their response. An example of interdependence among wireless carriers could be Verizon offering a lower price which causes the other carriers to respond. Non-price competition also exists in the wireless oligopoly market, because they are basically all providing the same service, carriers can use different devices, plans