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Market Structures
March 16, 2005
Market Structures
Part A:
Over the course of a product life cycle, as the firm moves through the sequences of monopoly, oligopoly, monopolistic competition, and pure competition the profit opportunities diminish.
What strategies could the firm pursue to prolong profitability?
The highest profits and most consistent profits are achieved while the firm operates as a monopoly. In the scenario the firm, Quasar, operates within this structure when its product is unique to itself and a patented technology. Innovation is what is going to keep this company in a monopolistic environment and profitable. By investing in efficiencies in production process Quasar is able to improve profitability and bank dollars for coming competition.
Instead of innovation and improvements in their technology the firm allows its patent to run out and then must compete with a company utilizing that technology to beat them at their own game. While still profitable, the Neutron is now utilizing technology available to competitors.
Recommended strategies would be technological improvements and additional patent protection?thus "morphing" the product and maintaining the monopolistic edge.
To afford this innovation additional profit dollars will have to be moved into research & development (R&D).
As the original patent expires we move into an oligopoly, essentially in competition with one other firm. My suggestion is to compete on two fronts: one, the new and improved technology which would be protected by a patent; and two, the machine which has had its technology patent expire.
In driving this b ...