Order Instructions

Up until now, our analysis of markets has not considered the impact of strategic behavior on managerial decision making. At one extreme, we examined profit maximization in perfectly competitive and monopolistically competitive markets. This discussion will focus on oligopoly markets. Oligopoly refers to a situation where there are relatively few large firms in an industry. No explicit number of firms is required for oligopoly, but the number usually is somewhere between 2 and 10. The products the firms offer may be either identical (as in a perfectly competitive market) or differentiated (as in a monopolistically competitive market).

 

There are few firms in an oligopolistic market and the manager must consider the likely impact of her or his decisions on the decisions of other firms in the industry. Moreover, the actions of other firms will have a profound impact on the manager’s optimal decisions. It should be noted that due to the complexity of oligopoly, there is no single model that is relevant for all oligopolies.

 

Before you begin, be sure to review the following resources:

 

Chapter 8: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets (The following sections only: Introduction, Perfect Competition, Monopoly, Monopolistic Competition)

Chapter 9: Basic Oligopoly Models

Instructions

 

Reply to the topic below by Wednesday of this week, 11:59 pm EST.

Reply to 2 classmates by Sunday of this week, 11:59 pm EST.

To see how discussions are graded, click the vertical ellipsis ( ) and select Show Rubric or refer to your instructor’s guidelines.

For more information about discussion grading criteria, visit the Graduate Discussion Forum Rubric and Participation Guide page located in ECPI Resources.

Discussion Topic

Managers must constantly adjust their decision making to changing market conditions. Consider the following information:

 

You are the manager of a small U.S. firm that manufactures and sells construction nails in a competitive U.S. market. The nails you sell are a standardized commodity. In other words, stores and consumers view your nails as identical to those available from hundreds of other firms. In other words, your nails are no different from any other nails on the market. You are concerned about two events you recently read of in trade publications:

 

The overall market supply of nails will decrease by 2 percent, due to exit by foreign competitors.

Due to a growing U.S. economy, the overall market demand for nails will increase by 2 percent.

In your original post, answer the following:

 

Based on this information, should you plan to increase or decrease your production of nails? Explain your answer.

Consider one product (good or service) marketed or sold by your current employer or a former employer. What is your prediction for market supply and market demand for this product during the next year? (Be sure to include information about the current economic climate for this particular industry and any forecasts or events that may influence the market.)

What steps should the firm take to respond to your prediction?

In your responses to your classmates, address the following:

 

Evaluate their predictions and steps for response. What might you do differently?

 

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