FORMS OF INDUSTRIAL ORGANIZATION
Forms of Industrial Organization
Forms of Industrial Organization
Introduction
According to McConnell and Brue “Economists group industries into four distinct market structures: pure competition, pure monopoly, monopolistic competition, and oligopoly. These four market models differ in several respects: the number of firms in the industry, whether those firms produce a standardized product or try to differentiate their products from those of other firms, and how easy or how difficult it is for firms to enter the industry” (McConnell & Brue, 2005, chap. 21). As part of the MBA/501 course the learning team is tasked with identifying a company for each market structure, and describe the pricing and non-pricing strategies the companies identified use. As a team we have identified the cash crop coffee, AT&T, Toyota Motor Corporation and British Waterways. As part of the assignment the team was also tasked with providing a brief explanation of how the industry evolved using the “Market Structure” simulation.
Pure Competition
According to McConnell and Brue, “Pure competition involves a very large number of firms producing a standardized product (that is, a product identical to that of other producers, such as corn or cucumbers). New firms can enter or exit the industry very easily…. In a purely competitive market individual firms exert no significant control over product price. Each firm produces such a small fraction of total output that increasing or decreasing its output will not perceptibly influence total supply or, therefore, product price. In short, the competitive firm is a price taker” (McConnell & Brue, 2005, chap. 22). Coffee is a cash crop whose price varies in the world mar ...