The pricing guidelines in a monopoly market are relatively straightforward. Since the company is the only producer offering the product, it can mark-up the price as far as the customer can bear. The pricing strategies for a producer operating in a perfect competition structure are also fairly intuitive. They are price takers, and hence price is set at the marginal cost of the product. This is due to the fact that there are many firms offering nearly identical products. However, there is optimal pricing for the market structures offering differentiated products with many competitors (oligopoly) or a few producers (monopolistic competition). These are much more complex and involved. It has been stated that differentiation in products that creates differences in customer valuation is the most prevalent type of competition. In such markets pricing strategies may include the three C’s of cost, competition, and customer.
Develop a paper detailing an analysis of market structures and relating pricing strategies that are suitable for each of these structures. Furthermore, include a real world example of pricing strategy for a specific company by identifying its market structure.
Your paper should be between 1750 and 2500 words, in APA Format and structured as follows:
1. Cover page with a running head
3. Introduction to market structures
3.1. Perfect competition
3.2. Monopolistic Competition
4. Pricing strategies as they are specifically related to each of the above market structures.
5. Case Study