Standard Models of Market Forms - Literature review Example

Static Competition: Conjectures Table of Contents Introduction 3 Standard Models of Market Forms 3 Cournot Equilibrium 3 Bertrand Equilibrium 4 Stackelberg Equilibrium 4 Monopolistic Competition 4 Conjectures 4 Conjectures Capturing Behavioural Effects 6 Policy Implications 7 Conclusion 8 References 9 Introduction Economics is often described as a particular domain that assists an organisation or individual to conduct wider studies on various factors including production along with consumption within a particular marketplace. Economics is widely regarded as a prominent aspect that enables individuals or companies to ensure effective decision making within any particular domain especially within the business sector at large. This aspect can be justified from the fact that economics enables companies within the business sector to understand the trend of the marketplace with regard to supply and demand flow. These aspects further enable companies to emerge with effective and accurate decision making concerning the optimum use of the available resources (Altman, 2012). In this particular essay, focus will be levied upon exploring the concept of behavioural economics and its implications upon competitive positioning of a company within the oligopolistic market structure. The essay also intends to explore the impact of rational conjunctures model in decision making of firms operating within the oligopolistic market structure. Standard Models of Market Forms There are various market structures that prevail in the present day environment of business. Each of the structures has their own set of competitive characteristics which are vital for the companies operating in the same to comprehend. A few of the competitive market structure concept is depicted hereunder. Cournot Equilibrium It is a model of economics that determines the structure of an industry where a particular business operates. The model helps companies to depict the output that they need to deliver in order to sustain within the competitive environment of a particular industry structure (Camerer & et. al., 2011). Bertrand Equilibrium It is also a highly recognised competitive model in economics that has noteworthy relevance with the business sector. The model helps companies with regard to optimum use of their business resources to attain the desired equilibrium stage (Camerer & et. al., 2011). Stackelberg Equilibrium It is a model of economics that is related with the formulation of effective strategies within a particular oligopolistic market structure. The model follows the theory where the leaders within the business are associated with the decision making while the rest are required to follow the same (Camerer & et. al., 2011). Monopolistic Competition It is a type of market structure where the sales of products and services are less dependent on the quality of the products rather it is associated with the brand image of the firm. A large number of companies operates with similar sort of products in this particular business market (Camerer & et. al., 2011). Conjectures With the advancement of technology along with the changing nature or process of conducting business activities, significant transformations have been measured within the operations of the companies with special inclusion of the economical factors associated with the operations. It has been learnt that conjectures in Economics are an important part of decision making for companies operating in oligopolistic marketplace. It mainly helps companies in ascertaining the operational effectiveness and approaches of the competitors operating in an oligopolistic market and likewise determining their decisions regarding output and price of their own products and services offered to the customers. As per the concept of conjunctures within the oligopolistic market, companies are dependent on the output of the competitors or similar firms operating in the same to decide their business output. Notably, the domain of behavioural economics helps in understanding the aspects of competition amid companies operating in the present day business environment (University of East Anglia, 2013). The rational decision model is an important part in the domain of economics within any particular business activities. In keeping with this particular theory of economics, companies that are able to ensure precise and effective decision making will certainly be able to acquire greater positive results at large. A large part of assumptions and predictions within any particular business in perfectly competitive market is determined with the help of various rational theories that prevail. It is also a particular model in behavioural business economics that is able to analyse the alternatives of a particular decision to deal with a given situation. The set of theories involved in rational decision model allows companies to enhance their competitive advantage and sustain for a longer duration within the oligopolistic marketplace (University of East Anglia, 2013). It has been comprehended that conjunctures in economies primarily relate with the concept of undergoing an alternative thinking process that is different when compared to the competitors. Notably, in the oligopolistic marketplace, there are more than one company that operates with similar sort of products and/or services. In this context, the role of conjectures and accurate decision making came into prevalence. In order to sustain in such stiff competitive marketplace under the oligopolistic market structure, companies need to make balanced and effective decisions that are in alignment with the competitive strategies of the firm at large (University of East Anglia, 2013). Conjectures within the oligopolistic marketplace help in resolving the aspect of multiplicity enabling a particular business to reach its equilibrium in a considerable manner altogether. This aspect further allows companies to emerge with differentiated products and strategies that can further facilitate them in ascertaining a diverse position for a particular firm in the marketplace which can ensure long-term sustainability and competitive advantage in oligopolistic market structure. Rational conjunctures are also another important part of the rationale decision model that is usually applied within the oligopolistic marketplace. In this particular market structure, the competition is quite high since a large number of companies operate with similar sort of products when compared to other market structures such as monopoly where the similarity of products of two companies is less prevalent. A rational conjuncture which is also known as equilibrium conjunctures is helpful for companies in determining the diverse resources and likewise optimising the same to ensure competitive advantage for the business at large (University of East Anglia, 2013). There are various theories associated with such model of decision making and most of the same can be considered as widely applicable within the operations of the companies in the oligopolistic marketplace (Autoriteit, 2013). Conjectures Capturing Behavioural Effects Behavioural economics is often regarded as one of the latest developments within the domain of business that is widely related with competition and other business related factors in various market structures including oligopoly and monopoly among others. Behavioural economics is a particular area of study of economics that deals with the concept of understanding the impact of psychological, social as well as emotional factors upon the decision making of companies or individuals in a particular marketplace with regard to competition. Behavioural traits of any particular individual are believed to have a noteworthy influence upon the thinking and notion of individuals (University of East Anglia, 2013). Correspondingly, the impact of behavioural economics upon competition is a widely prevalent scenario. As per this particular concept, behaviours of the buyers within the oligopolistic market are largely determined by the economical factors of the products and services offered by the companies. These factors can be in the form of each of the schemes that is associated with the products and/or services that relates with price and economics. These aspects can also be regarded as relevant with the cognitive element amid the buyers that further influence their economic behaviour and thought process with regard to the purchase of particular products. Subsequently, the role and influence of conjuncture theories and decision making model is crucial since it helps companies in their decision making regarding the economic factors of its products and services when compared to the rivals operating within the industry (Camerer & et. al., 2011). Policy Implications Behavioural economics has several key implications upon the policies relevant to competition and consumer trend in the domain of economics. Behavioural economics is a particular domain of research that deals with ascertaining the psychological aspects of formulation of decisions regarding purchase of product and/or services. It also is regarded as a particular concept that deals with analysing the factors that impact individuals to make choices relevant to buying. It also emphasises understanding behavioural traits of individuals that have certain implications upon buying behaviour of individuals or groups. The formulation of competition policy has major resemblance with the concept of behavioural economics and its findings for a particular marketplace (Autoriteit, 2013). This can be justified from the fact that since behavioural economics depicts the trends and behaviour of buyers along with purchasing pattern of a particular marketplace, companies are availed with the opportunity to devise more effective strategies with the help of stiff decision making in various domains of business (Altman, 2012). This can further depict a considerable influence of behavioural and rational decision making conjunctures towards policies of competition (Camerer & et. al., 2011). Conclusion From the overall analysis of the information gathered from various secondary sources for this particular essay, a better insight relevant to behavioural economics has been gained. Notably, behavioural economics is a particular concept that involves analysing the psychological factors that can influence buying behavior of the customers or any individual. It is also widely regarded as a concept that has utmost influence on policies of competition for the companies that operate within the oligopoly market structure. Hence, it can be concluded that behavioural economics is indeed quite crucial in the present day business environment in various market structures. References Altman, M., 2012. Behavioral Economics For Dummies (Google eBook). John Wiley & Sons. Autoriteit, 2013. Behavioural Economics and Competition Policy. The Netherlands Authority for Consumers and Markets, pp. 1-16. Camerer, C. F. & et. al., 2011. Advances in Behavioral Economics (Google eBook). Princeton University Press. University of East Anglia, 2013. Behavioural Economics in Competition and Consumer Policy. Home. [Online] Available at: http://competitionpolicy.ac.uk/documents/107435/4503876/CCP+economics+book+Final+digital+version+-+colour.pdf/fca104c5-1248-4e7f-87b7-c9ac57f575b0 [Accessed January 25, 2015]. Read More