Essays on Coca Cola Company and Pepsi Company Oligopolistic Market Structure Case Study

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The paper "Coca Cola Company and Pepsi Company Oligopolistic Market Structure" is a great example of a case study on macro and microeconomics. The organization of a market constitutes market structure. Market structures are very important in influencing the behavior of firms, their customers, and the performance of the market. There are various structural features that influence the conduct and performance of the market. First is the concentration of sellers and buyers, that is, are sellers/buyers many, a few or only one and how are they distributed (Coca-cola, 2010).

The second feature consists of the effect of prevailing conditions on the entry of new players, that is, to what extent do established firms have an advantage over new entrants. The next feature is the nature of the products offered by the firms, that is, are products homogenous or do product differentiation exist? Another feature is the extent to which the organization produce their own distribution channels or own input requirements for their products (Norman & Thisse, 1996). Another feature is to what extent the firms operate in different markets instead of a single market.

The final feature is the effect of market performance and conduct on market structure (McManus, 2007). When these features are considered two market structures result. These are perfect competition and imperfect competition. The imperfect competition comprises the monopolistic competition, oligopoly, duopoly, and monopoly (McManus, 2007). In this paper, we discuss the Coca Cola Company and Pepsi company product oligopoly competition. Oligopoly An oligopoly is characterized by a few firms. Of these firms, each of them is large enough such that its behavior has a large impact on the demand for products of other rivalry companies.

Thus players in oligopoly lack stable demand curves. Coca Cola Company and Pepsi Company are examples of firms in oligopoly (Erickson, 2009). When Coca-cola changes the prices of its products, the demand curve for products of Pepsi Company will shift as a result of the price changes in Coca-cola products. Due to instability in the demand curves in oligopoly, the profit maximization method using a comparison of the cost of the firm to the demand curve of the firm is usually complicated or even unworkable.

For instance, Coca Cola Company could decide on its best output and price but Pepsi Company can react to this by changing its output or price for its products (Coca-cola, 2010).

References

Coca cola. 2010. Home. Available at www.cocacola.com [Accessed 20 Sept. 2010]

Erickson, G. 2009. An oligopoly model of dynamic advertising competition. European Journal of Operational Research, 197(1): 374-388

Hendricks, K. & Mcafee, R. 2009. A theory of bilateral oligopoly. Economic Inquiry, 48(2): 391-414

McManus, B. 2007. Nonlinear pricing in an oligopoly market: the case of specialty coffee. The RAND Journal of Economics, 38(2): 512-532.

Metcalf, G.E. and Norman, G. 2003. Oligopoly Deregulation and the Taxation of Commodities. Contributions to Economic Analysis & Policy, 2(1), Article 12.

Norman, G. & Thisse, J. 1996. Product Variety and Welfare under Tough and Soft Pricing Regimes. Economic Journal, Royal Economic Society, 106(434); 76-91.

Pepsi. 2010. About Us. Available at www.pepsi.com [Accessed 20 Sept. 2010]

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