Monopolistic Competition in the Retail Industry
Defining the Market
The retail industry is comprised of thousands of different brands and companies. However each is defined by its quality of make and materials used. Abercrombie & Fitch, Timberland, and Guess are all well-known and respected brand names. However if prices were to exceed what people are willing to pay, then the consumers would alter their preferences and buy from another brand. Therefore we are dealing with a monopolistic competition.
Monopolistic competition is often defined as: a common form of industry structure characterized by a large number of firms, none of which can influence market price by virtue of size alone; some degree of market power is achieved by firms producing differentiated products. New firms can enter and established firms can exit with ease )
I. ?common form of the industry structure characterized by a large number of firms none of which can influence market price by virtue of size alone ? New firms can enter and established firms can exit with ease.?
Every year hundreds of new designers emerge into the retail industry. No matter what one?s style of clothing, there are dozens of other brands to choose from should one company?s price go beyond the household?s expectation of price. Each company is on a careful balance of price and cannot exceed the other company?s prices beyond what the consumer sees as reasonable. Moreover, firms can enter and exit easily because there are no tariffs and resources are plentiful. This is the competitive side of monopolistic competition.
II. ??some degree of market power is achieved by firms producing differentiated products??
However the retail firm is also monopolistic because of the added aspect that each company does have some degree of market power through their differentiation of products. One way firms differentiate themselves is through the consumer and the way they fashion their products. The consumer determines the success/failure of a company. A major problem firms face is how to accommodate to the changing preferences of the consumer. Guess was at one point similar to Levi?s, a brand of jeans limited to the department store. However in 2002, Guess signed on Marciano, a prominent high-end European designer, and sales have boomed since. Now, Guess is a well-known, popular brand among teenagers and ...
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...l be most receptive. Timberlands are successful in areas with cold, long winters like Ohio but would make minimal profit in area such as Florida.
Bibiliography
1. Case, Karl E. & Ray C. Fair. Principles of Microeconomics. New Jersey: Pearson Education, Inc., 2004.
2. ?Guess-Marciano,? 2004.
< http://www.marciano.com>
3. ?Glossary of Economic Terms? Federal Reserve Bank of San Francisco.
Understanding the Terms
Symbol = a code comprised of letters used as a unique identification of the stock
52 week High = the highest price reached during the last 52 weeks
52 week Low = the lowest price reached during the last 52 weeks
Dividend = taxable payment declared by a company?s board of directors & given to its shareholders out of the company?s current/retained earnings
Dividend Yield = yield a company pays its shareholders in the form of dividends; calculated by the amount of dividends paid per share over the course of the year divided by the stock price
P/E Ratio = (aka the price earnings ratio) most common measure of how pricey the stock is; equivalent to a stock?s market capitalization divided by its post tax earnings over a year?s period
According to Neill (1992), “It’s time to stop sacrificing the economic wellbeing of the vast majority of Americans and our children’s future in order to underwrite the conspicuous consumption of the very rich” (p. 114). Monopolies are the only ones that can produce certain merchandises in a specific market. With no alternative product to buy, monopolies often brand their products as luxurious items and in return driving prices up. The insights of the monopoly model suggest some of the problems that arise from monopoly power are restricting output, artificially higher prices, lower quality, and persistent profits.
Lovegrove, W. (1991) ‘Spatial frequency processing in dyslexic and normal readers’, in Stein, J.F. (ed.) Vision and Visual Dyslexia, London, Macmillan.
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Introduction Dividends are the distribution of profits in the company. It depends on the type of dividend policy that is being made by companies. Dividend policy will affect the behaviours and attitudes of investors towards the company. Many economists and financial experts have constructed different theories to interpret the effects of a dividend policy on the society. But these theories are contestable since they are not tested in the real world.
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Petro, G. (2012, November 5). The future of fashion retailing --- the H&M approach (part 3 of 3). Retrieved from http://www.forbes.com/sites/gregpetro/2012/11/05/the-future-of-fashion-retailing-the-hm-approach-part-3-of-3/
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I can't remember the day my hair and I parted ways. We used to get along when we were young! Displayed in the ponytail fountain on top of my head, she was quite cooperative....