Case Study of Market for Tuna Company

PRICING

To be able to understand how the four types of market affect pricing decisions we must first look at the factors considered when setting prices. As per discussion in class, competitors; consumer perception of price and values; market and demand all together contribute to the pricing decisions. According to the study of Economics these factors are present in the four types of market: Monopoly, Oligopoly, Perfect competition and Monopolistic competition.

In monopoly, where there is only one provider of a product or service, the company controls the pricing decision. Seeing that there is none, if not limited, existing competition in the market proves that the company is not dependent on the pricing decision of other electricity service suppliers. A common local example would be Meralco, although there are other electricity providers outside Mega Manila, Meralco is still considered the largest and the most income generating electricity supplier in the country. Being the largest assumes a big bulk of the population demanding and relying on the services it provides, there is not much choice left for the consumers but to patronize Meralco, in effect the charges that the company asserts (under the government’s approval) will always be assimilated by the consumers. The unavailability of other options gave them the position to take control of the pricing of charges.

In oligopoly the market is shared by a small number of producers or sellers. Since it is dominated by a small number of sellers, each one is mindful on the act of the other and decisions of each other firms influence one another. There is a concern on the reactions or responses of the other sellers in the markets thus the pricing decision is thought of carefully against the competitor’s pricing decisions, it now becomes dependent on the other participants in the market. The local examples are the prominent landline telecommunication service suppliers such as PLDT, Bayantel, Digitel and Globelines. Based from observations on ads and promotions every time one seller initiates a call charge reduction the other sellers automatically follows the trend. The whole idea in this kind of market is that firms are actually after price decrease, with the hope of gaining a bigger share of the market. Either pricing decision indicates a decrease or increase all actions will create a price war response with other sellers.

A perfect competition market describes a market setting wherein the buyers and sellers are so numerous that the market price of commodity is no longer in control of either the buyers or the sellers.