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Examples are Cournot oligopoly, and Bertrand oligopoly for differentiated products. Bain's (1956) original concern with market concentration was based on an intuitive relationship between high concentration and collusion which led to Bain's finding that firms in concentrated markets should be earning supra-competitive profits.
The major sources of product differentiation are as follows. Differences in quality which are usually accompanied by differences in price; Differences in functional features or design; Ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing; Sales promotion activities of sellers and, in particular ...
Differentiation drives profitability when the added price of the product outweighs the added expense to acquire the product or service but is ineffective when its uniqueness is easily replicated by its competitors. [6] Successful brand management also results in perceived uniqueness even when the physical product is the same as competitors.
In the short term, firms are able to obtain economic profits as a result of differentiated goods providing sellers with some degree of market power; however, profits approaches zero as more competitive toughness increases in the industry. [17] The main characteristics of monopolistic competition include: Differentiated products; Many sellers ...
Imperfect (or 'differentiated') oligopolies, on the other hand, involve firms producing commodities which are heterogenous. Where companies in an industry need to offer a diverse range of products and services, such as in the manufacturing and service industries, [12] such industries are subject to imperfect oligopoly. [13]
Perfect competition refers to a type of market where there are many buyers and sellers that feature free barriers to entry, dealing with homogeneous products with no differentiation, where the price is fixed by the market. Individual firms are price takers [3] as the price is set by the industry as a whole. Example: Agricultural products which ...
Contribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on one's assumptions regarding the relationship between the product's price and the number of units that can be sold at that price.
The elements of the marketing mix are: Product – the item or service that is being offered, through its features and consumer benefits and how it is positioned within the marketplace whether it be a high or low quality product. Price, is a reference to the sacrifices made by a consumer to acquire a product and may include both monetary and ...