Economists

Introduction

Economists groups industries into four distinct market structures: monopoly, oligopoly, monopolistic competition, and pure competition. These four market models differ in several different ways in regards to the number of firms are in the industry, whether those firms are producing a standardized product or try to differentiate their products from those of other firms, and how easy or difficult it is for firms to enter into the industry. In a monopoly there is only one firm that is producing a standardized product. An example of a pure monopoly is the Major League Baseball that differentiates them in respect to improving its product by having control of what comes in and what goes out. (Description of Oligopoly goes here when it is turned in) In a monopolistic competition there a large numbers of sellers producing differentiated products. “There is a widespread non-price competition, a selling strategy in which one firm tries to distinguish its product or service from all competing products on the basis of attributes like design and workmanship.” (McConnell & Brue 1) A good example of this is Best Buy who unlike other competitors provides a number of customer service options such as Geek Squad computer service and personal shopping assistants. (Description of pure competition)

Monopoly

“Pure monopoly exists when a single firm is the sole producer of a product for which there are no close substitutes” (McConnell & Brue). Major League Baseball (MLB) fits the description of a monopoly. Since 1922, it has operated with an antitrust exemption, giving it additional monopolistic power (Rovell, 2001). With an absence of competition, team owners can raise ticket and concession prices every year to maximize profits. MLB continues to set attendance records every year, even as prices are increasing (Major, 2007). Its demand curve is downward-sloping, as filling a stadium requires increasing demand enough to fill the less desirable seats, and those tickets are lower in price. In addition to controlling prices, MLB also controls output, as each team is limited to 81 regular season home games per year and teams configure stadiums taking into consideration the number of seats they will hold and in which sections those seats will be located. To keep demand rising, MLB must continue to improve its product. Teams must field the best players they can, as winning teams create higher demand for tickets. They must provide adequate entertainment in well-maintained stadiums. New stadiums are often publicly financed and always boost attendance. MLB pricing strategies include setting ticket prices according to the view of the field, discount group pricing for lower attended weekday games and games against inferior teams, discounts for senior citizens, students and military, high-priced suites and luxury boxes, parking priced by proximity to the stadium, and raising concession prices every season (Majors, 2008). Non-pricing strategies employed by MLB including licensing, merchandising, television, radio and internet broadcasting rights, stadium sponsorships, and marketing the game internationally, particularly this year, as the regular season began outside the United States for the first time, with a Red Sox/Athletics series played in Tokyo. An ability to control prices, impenetrable barriers to entry, and the absence of a substitute product place Major League Baseball in the monopoly market structure.

Monopolistic Competition

“Monopolistic Competition is characterized by a relatively large number of sellers producing differentiated products (clothing, furniture, books, and computer software). (McConnell & Brue 1) Best Buy sells consumer electronics, appliances, software, and home-office products. Best Buy has been trying to distinguish its products and services versus other competing retail stores on the basis of their attentive customer service assistants and the Geek Squad’s computer services. Best Buys has come up with a solution to distinguish themselves from their competition by developing an effective marketing strategy to meet customer needs because of their undifferentiated mix of products. “Best Buy marketers had to determine methods to keep customers loyal to the Best Buy chain, and to do this they turned to Claritus’ PRIZIM NE segmentation system.” (Claritus.com) Backed by this plan Best Buy developed a “customer centricity” model, focusing on a select set of customer segments and a goal of developing an in-depth understanding of them. In order to achieve this Best Buy must update their product lines so they are staying on track of the competition. Best Buy pricing strategies include advertisements on T.V that introduce new services offered by the Geek Squad, new products lines, shopping online at BestBuy.com, competitive matching, and production cost. Non-pricing strategies used by Best Buy include merchandising, marketing the store by word of mouth. Best