...realized they could not repay it. The main culprits, Mexico, Brazil and Argentina, borrowed money for development and infrastructure programmes. (causes ) Their economies were booming, and banks were happy to provide loans to the point where Latin American debt quadrupled in seven years. When the world’s economy went into recession in the late 1970s the problem compounded itself. Interest rates on bond payments rose while Latin American currencies plummeted. The crisis officially kicked off in August 1982 when Mexico’s finance minister Jesus Silva-Herzog said the country could not pay its bills. (how they overcome) It took years to sort out the crisis, with Latin American nations eventually turning to the IMF for a bailout in exchange for pro-market reforms and austerity programmes. It also led in 1989 to the novel creation of Brady bonds, which were designed to reduce debt in these countries by converting distressed sovereign debt into a number of different types of bonds. Furthermore, banks could exchange claims on these debts for tradable assets, which enabled them to get the debt off their balance sheets. 2) Savings and loans crisis – 1980s: while the solution to the Latin American crisis was being put together, a domestic one was happening right in front of the US regulators. The so-called savings and loans crisis took place throughout the 1980s and even into the early 1990s, when...
Words: 747 - Pages: 3
...Transaction costs theory and the imperfect markets. Williamson’s successful complementation of the Coases approach of the firm as an alternative to reduce the cost of using the price mechanism, with Herbert Simon’s organizational theory, gave birth to the Transaction Costs Theory (TCT)1. This meant a big step, which evolved the theory of the firm, from its obsolete neoclassical toots and assumptions -of a perfect competitive market and a perfect rationality-, by adding the issues of bounded rationality and opportunism to Coases work2. Williamson opened the path to new ways of conceiving and complementing the theory of the firm in general, and the transactions costs theory in particular. By enabling to the economic theory the enhancing and the building of new connections between cognitive psychology and economics. Connections that have allowed, among other things, the development of a larger view in the roll of the firm, no only as an avoider of costs, but also as a creator of knowledge. All in better accordance with the modern firms logic of making business. In order to understand the transaction costs theory, one has to comprehend that the competitive market structure, is only a reference to be taken into account, when one analyses the observed structure of markets, which are called “imperfect competitive”, For the market is not given under a homogenous form to all economic agents, but is continuously changing under agents decisions and behaviours 3 ....
Words: 1410 - Pages: 6
..."being an oligopolist is not easy", and whether it is true or whether the truth lies in between. Aspects of Market Structure The four types of market structure are listed in the drawing below: Characteristics of an oligopoly Definition Oligopoly is a type of imperfect competition with a market structure, that has only a small group of sellers which offers similar or even identical products. Oligopolist, Oligopoly An oligopoly is a market form in which a market is dominated by a small number of sellers (oligopolists). There are few participants in this type of market and each oligopolist is aware of the actions of the others. Oligopolistic markets are characterised by interactivity. The decisions of one firm influence and are influenced by the decisions of other firms. The question is how we can describe the market situation of an Oligopolist. If we compare it to the other possibilities of a market situation such as a competitive market or a monopolistic market, it is neither of them. The typical characteristics of an oligopoly is that each of the market players offer a product similar or identical to the others in a competitive market. This fact distinguishes the market structure from a monopolistic competition where the firms are similar but not identical. On the other side, there exists more than one player in this kind of market what makes it different from the monopoly. So the situation begins in a difficult way for an oligopolist: on...
Words: 2540 - Pages: 11
...larger businesses that have a larger market share and then some slightly smaller businesses competing with each other. Due to these facts the industry has been described as an oligopoly. This is because within an oligopoly there is a large number of product differentiations, which mirrors the automotive industry as the same company usually produces a wide variety of different models, shapes & engine sizes. Another feature is that the barriers entry are generally high as the few firms with a larger market share have already established themselves within the market and the firms with a reasonable market share are also fairly established and have a lot of capital. This makes it difficult for small & upcoming businesses to enter the market. The overall global automotive market is in a period of strong growth and profitability, and sales have reached prerecession levels in some areas. However the European and UK market is recovering the slowest due to the scale of the recession (Hirsh et al, 2014). This may have altered the structure of the industry as a whole. Industry Structure This chart is a representation of how the market share of each company is divided up in UK market in 2014. This evidence helps to further back up the point that the automotive industry is an oligopoly (imperfect) as few firms are the market leaders with a higher percentage e.g. Volkswagen, Vauxhall and Ford. Whereas many other firms are operating around the same market share. Source - Mintel Source...
Words: 2067 - Pages: 9
...ASSIGNMENT ON MARKET STRUCTURE IN BANGLADESH Course Title: Managerial Economics, Course Code: 5302 Prepared by Mohammad Shakawat Hossain Matric No.- R132140, Semester- 3rd section- Spring-2014 Submitted to Mr. Monir Ahmed Associate Professor Faculty of business Administration, IIUC Department of business Administration International Islamic University Chittagong Monopolistic Competition: Monopolistic competition, is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. The firms in Bangladesh are not able to exactly differentiate their product but the pressure of various aspects such as interest rate spread and the presence of international banks make them provide the services to the customers. In this effort the banks in Bangladesh are able to create differentiated products. The basis for the differentiated products is different which another reason for is differentiated products. These are market size in the region, returns for the banks and the risks that are associated. Based on this the banks are differing their costing and in different manner. For example some banks are offering flexible rates and others are offering fixed rates for interest. The banks also vary...
Words: 435 - Pages: 2
...It was for the first time that the bottle was containing water with bubbles. For the first time Michael Ovens had started the glass blowing machine which were used in automatic production of bottles. With use of these machines 69000 bottles were produced in place of 1500 bottles which were hand-made. After all these efforts the Soft drink industry started centuries ago. In the present time soft drinks is a very large industry and it is known as cold drinks now. Now in India there are only two major competitors Pepsi and Coke. This industry comes in beverages industry in India and it is growing industry because everyone likes to have cold drinks but it is seasonal the sales of cold drinks are in boom mainly in summers. Type of market: Market Structure in Micro Economics – The ‘micro’ prefix is derived from Greek word ‘mikros’, which has meaning small. The unit of study in micro economics is the part of the economy, such as individual households, firms and industries. Micro economics is related with economic activities of individual economic units as consumers, resource owners and business...
Words: 2971 - Pages: 12
...product differentiation and market entry barriers, within your chosen industry. It is recommended that you choose an imperfectly competitive market structure (for example, monopolistic competition, oligopoly, or monopoly) to consider within your assignment. The characteristics of each market structure, in terms of the extent of product differentiation and market entry barriers, are presented below:- Perfect competition • No product differentiation. Tendency toward normal profits in the short-term, although in the short-term both super-normal and loss making situations can also affect firms within an industry. • No market entry barriers. Produce normal profits in the long term. Monopolistic competition • Product differentiation. Tendency toward short-term super-normal profits. • No market entry barriers. Super-normal profits cannot be maintained by the firm in the longer term, due to new market entrants increasing supply within an industry. Oligopoly (a few firms) • Product differentiation. Tendency toward short-term super-normal profit. • High market entry barriers. Enable firm to maintain super-normal profits in the long run. Monopoly (single firm) • Product differentiation. Tendency toward short-term super-normal profit. • Extremely high market entry barriers. Enable firm to maintain super-normal profits in the long-run. Use a range of economics textbooks to understand the market structure, once you have...
Words: 1425 - Pages: 6
...Monopolistic Competition is a market structure in which there are several or many sellers; each produce similar, but slightly differentiated products. Differentiation can be on the basis of colour, design, size, taste, fragrances, etc. Each producer can set its price and quantity without affecting the marketplace as a whole. Wikipedia explains the concept as, “A common market form. Many marketers can be considered monopolistically competitive, often including the markets for restaurants, cereal, clothing, shoe, and service industry in large cities”. “Monopolistic Competition differs from perfect competition in that production does not take place at the lowest possible cost. Because of this, the firms are left with excess production capacity. This market concept was developed by Chamberlin (USA) and Robinson (Great Britain)” – Investopedia. Chamberlin and Robinson also described this situation as an imperfect competition as the market does not have the conditions required for perfect competition. The characteristics of Monopolistic Competition are stated below: - 1. It has both the elements of Monopoly and Perfect Competition. 2. Large number of buyers and sellers in the market. 3. Non-Price difference (product differentiation) among the competitive products. 4. Few entry as well as exit barriers. 5. All the sellers have relatively small market share. 6. All the firms are profit maximizes. 7. Each firm has a limited ability to affect its output price. 8. The...
Words: 406 - Pages: 2
...Oligopoly ← Oligopoly Market Characteristics ▪ Few sellers. ▪ Homogenous or unique products. ▪ Blockaded entry and exit. ▪ Imperfect dissemination of information. ▪ Opportunity for above-normal (economic) profits in long-run equilibrium. ← Examples of Oligopoly ▪ Carbonated Beverage Market (Pepsico & Coca Cola), Domestic aviation Industry in India (Few Players like Indian Airlines, Jet airways, Kingfisher). ← In this form of market structure, the number of sellers is few such that a seller can closely watch what his co-selller is doing in terms of his price & output and take that into consideration while doing his own profit maximization exercise. ▪ For instance: Let P = a – bQ be the market demand curve where the market is supplied by two sellers 1 & 2. Then market demand can be expressed as P = a – b (Q1+Q2). Now firm/seller 1 will define his profit function as Π = TR –TC = PQ1 – C1 = {a – b(Q1+Q2)}Q1 – C1 . Thus now with oligopoly, a seller’s profit function includes rival’s output Q2 as given, which was not the case in other forms of market. Similarly it can also include P2 if sellers are competing based on Prices and not on market share This value of rival’s output (Q2) is arrived at by a seller by looking at how rival was selling in last period. He looks at the quantity or price his rival was selling...
Words: 570 - Pages: 3
...Differentiating Between Market Structures ECO/365 Differentiating Between Market Structures A market structure in economics describes the state of the market with respect to its competition. There exist several different market structures like perfect competition, oligopoly, and monopolies among others. These markets all produce different types of goods or services, as public and private goods as well as everyday and collective goods. Firms operating in these different market structures utilize the labor market in very different ways because of very divergent uses of energy in each market structure, so it is important for a firm to use the labor market equilibrium principles to their advantage to efficiently cover the costs of production and maximize profits. In economics a good is something defined as any object, service or right that increases utility, directly or indirectly. Goods are further broken down into public and private goods. A public good is a good that can be used simultaneously by many users, which is called non-rival, and people who have not paid for the good cannot be excluded from its utility, which in economics is call non-excludable. Together this means that the consumption of a public good by an individual does not affect the availability of that good to anyone else, which is called being non-rival and non-excludable. It’s obvious to see, however, that a truly non-rival and non-excludable good can’t exist; economists just look at the goods...
Words: 1749 - Pages: 7
...NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY A Dissertation by MANUEL A. HERNANDEZ GARCIA Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY August 2009 Major Subject: Economics UMI Number: 3384249 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI 3384249 Copyright 2009 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346 NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY A Dissertation by MANUEL A. HERNANDEZ GARCIA Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Approved by: Chair of Committee, Steven N. Wiggins Committee Members, Li Gan James Griffin Steven L. Puller Head of Department, Larry Oliver August 2009 Major Subject: Economics iii ABSTRACT Nonlinear Pricing Strategies and Market Concentration in the Airline Industry. (August 2009)...
Words: 15948 - Pages: 64
...Although there are several measures in the literature, generally the biggest four and biggest eight firms are considered (Cabral, 2000). A low concentration ratio is regarded as an industry with more competition and firms have very low control. The low concentration can be from 0 to 50 per cent and the industry can have a structure ranging from perfect competition to oligopoly. Since in industry A there are 20 firms and the CR is 20 per cent, it can be deemed as a low ratio. Therefore, the industry is a perfectly competitive one with a lot of firms competing with each other, and no one firm controls a big chunk of the market. A perfectly competitive industry has many buyers and many sellers, also the products are quite standard and resemble to each other (Microeconomics: The Basics). The number of sellers makes it impossible for any single firm to control the market and the price is determined by the demand and supply conditions. Since the products are very similar or identical to each other, the buyers can switch from one good or service to another when there are price differentials. Additionally, the barriers to entry and exit are quite low; hence firms can easily enter and leave the industry. As a result of all these features, the economic profits are zero and maximum efficiency is achieved. Nevertheless, the pure perfect competition does not exist in real world, only some industries are operating close to this ideal situation. When there is an increase in the demand for...
Words: 967 - Pages: 4
...OLIGOPOLY An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market. Concentration ratios Oligopolies may be identified using concentration ratios, which measure the proportion of total market share controlled by a given number of firms. When there is a high concentration ratio in an industry, economists tend to identify the industry as an oligopoly. Characteristics 1.) There are few competing sellers but they are too large in the size of a giant company. 2.) Products are homogenous, others are differentiated. 3.) Entry of new firms can be very difficult. 4.) There is mutual interdependence among firms in the market 5.) Demand curve for oligopoly is kinked demand curve. Examples - Gasoline, cement, sugar and telecommunication are examples of products of homogenous oligopoly. - Cars and machines are products of differentiated oligopoly. - Oil and telecommunication (Globe, Smart, Sun Cellular) companies are examples of firms operating in an oligopolistic environment. Demand Curve KINKED DEMAND CURVE If the assumptions hold then: • The firm's marginal revenue curve is discontinuous (or rather, not differentiable), and has a gap at the kink • For prices above the prevailing price the curve is relatively elastic • For prices below the point the curve is relatively...
Words: 845 - Pages: 4
...Differentiating Between Market Structures A market structure in economics describes the state of a market with respect to its competition.There exist several different market structures like perfect competition, oligopoly, and monopoliesamong others. These markets all produce different types of goods or services, like public and privategoods as well as common and collective goods. Firms operating in these different market structuresutilize the labor market in very different ways because of very divergent uses of labor in each marketstructure, so it is important for a firm to use the labor market equilibrium principles to their advantageto efficiently cover the costs of production and maximize profits.In economics a good is something defined as any object, service or right that increases utility, directlyor indirectly. Goods are further broken down into public and private goods. A public good is a good thatcan be used simultaneously by many consumers, which is called non-rival, and people who have notpaid for the good can not be excluded from its utility, which in economics is call non-excludable.Together this means that the consumption of a public good by an individual does not affect theavailability of that good to anyone else, which is called being non-rival and non-excludable. Its obviousto see however, that a truly non-rival and non-excludable good cant exist; economists just look at thegoods that come close to the definition of a public good. A private good is the opposite...
Words: 5053 - Pages: 21
...this analysis is Porter’s Five Forces Model. This model, created by Michael E. Porter and described in the book “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” has proven to be a useful tool for both business and marketing-based planning. Background The pure competition model does not present a viable tool to assess an industry. Porter’s Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment. * Suppliers * Buyers * Entry/Exit Barriers * Substitutes * Rivalry Supplier power * Supplier concentration * Importance of volume to supplier * Differentiation of inputs * Impact of inputs on cost or differentiation * Switching costs of firms in the industry * Presence of substitute inputs * Threat of forward integration * Cost relative to total purchases in industry Buyer power * Bargaining leverage * Buyer volume * Buyer information * Brand identity * Price sensitivity * Threat of backward integration * Product differentiation * Buyer concentration vs. industry * Substitutes available * Buyers’ incentives...
Words: 1778 - Pages: 8
