Types Of Monopolies

777 Words4 Pages
The barriers to entry may be either natural or artificial. Without such barriers, monopolies cannot continue their operations. One of the natural barriers is economies of scale. If one firm enjoys great economies of scale, it can decide to cut down on its prices such that they are below the prices of its competitors. An Oligopoly is a market structure where the market is dominated by a few firms. Unlike the theoretical perfect competition market, Oligopolies exist in real life. A market structure that is dominated by two companies is known as a duopoly. An example of an oligopoly is the soft drinks market that is dominated by Coca-Cola and Pepsi (Zheng, 2013). Oligopolies can be categorized according to the type of product they produce. The…show more content…
The PED can also be used to calculate the effects of the change in product price on the amount of the product demanded. The rate at which a change in price affects the quantity demanded varies considerably. The PED coefficient can either be positive or negative. When there is a proportionate change in the quantity demanded, then the PED will be positive. The Coca-Cola Company can use the PED to decide whether to raise or lower the price of its products. The PED can also help the company to decide on whether to price discriminate or not. By discriminating the price of its products, Coca-Cola can enhance the customer loyalty. Coca-Cola can also use persuasive advertising to add on its vast customer base and retain the loyal customers. The promotion campaigns are likely to shift the demand curve to the right. Furthermore, the demand will become less elastic. Coca-Cola evaluates elasticity assuming that all other factors remain constant. The logic behind this method of evaluation is to determine how price affects overall…show more content…
Coca-Cola controlled the market structure and maintained its competitive advantage over its competitors. The company therefore managed to have a large share in the soft drinks market that was characterized with few and weak competitors. However, the introduction of Pepsi was worrying. Coca-Cola enjoyed the advantages of a monopoly until the resurgence of Pepsi. Pepsi proved to be a potential competitor. Coca-Cola strives to utilize every strategy available to become successful whenever it launches its business in overseas markets. Pepsi seemed to have discovered Coca-Cola’s disadvantages and it was using them to check Coke’s dominance. The new market structure brought about cut throat competition between the two cola giants. However, the competition ate into a large chunk of the two companies’

More about Types Of Monopolies

Open Document