Price Competition Versus Non Price Competition Economics Essay

terms Competition Versus Non Price Competition economic science EssayWhen t present is emulation in staunchs on the terms of transplant in cost, it is known as cost disceptation. Price competitor can involve discounting the wrong of a intersection point (or range of yields) to change magnitude its demand. Various forms of securities industry indulge in toll wars in order to earn a massive grocery chisel in contend and a profit margin. As worth of a product increases or decreases, it leads to fluctuations in the demand of the product of particular star signs. So all the theatres always keep a watch on the food merchandiseplace forces of demand and supply, the derived symmetricalness price, controversy etc. in order to skim the market.Non price disceptationWhen there is competition in firms on the basis of factors different than price such as advertising, gross tax revenue forwarding, product differentiation, markering etc., it is known as non-price co mpetition.Price competition vs. non-price competitionPrice CompetitionNon Price CompetitionCompetition between the firms based on price where one firm tries to beat or match the price of the other.Firm tries to be the lowest cost giver for the product in the market.The firm must countenance the vision to respond to the strategy of other firm very quickly.High bad-tempered price snapshot must see more of price competition.Here the firms compete with distri aloneively other with the strong factors like product differentiation, quality of the product etc.The firm tries to build consumer loyalty so that it can sell its product to the maximum bod of consumers and increase its market sh atomic number 18.They promote aw atomic number 18ness in the consumer for the differentiation of their product.High own price crack must see more non price competition. issuing of price on sum Demanded measuring rod SuppliedAn increase in price has an inverse relationship with the step demanded and a positive relationship with the amount supplied i.e. an increase in price decreased the demand and increases the amount of money supplied and vice versa.Determination of Equilibrium priceThe market forces of demand and supply determine the equilibrium price. This equilibrium price be ascends the basis for firms in perfect or imperfect competition to charge a price for their product. Thus the firms make a cost minimising production functionFigure 2 Equilibrium price provide and Demand forcesSupply_ snub_shiftIn the figure, equilibrium price is p0 and equilibrium quantity is QO i.e. when quantity demanded is equal to quantity supplied equilibrium is achieved. These points only show the equilibrium state just do non show the answer of the change of quantity demanded and supplied with respect to price. Here comes the importance of rubberyity of demand and supply.ANALYSIS OF DIFFERENT market place SITUATIONS WHICH GIVE RISE TO PRICE AND NON-PRICE COMPETITION snap fastener an d price and non-price competition play a resilient role in determining various forms of market structure, their price, demand and supply, total revenue, shape of the demand curve etc. the market structure can be delineated as followsMARKETMarket bodily structureImperfect competitionMonopolyPerfect Competition noncompetitiveOligopolyMarket is not merely a geographical expression but it can be any place where buyers and sellers are in regular meeting and they have a perfect knowledge of price.BASIC FEATURES OF MARKETVery macro number of buyers and sellers outlast in a market. nigh(prenominal) homogeneous as well as heterogeneous products are uncommitted in a market.Free mobility (movement) of and services untroubleds in a market area.Firms are free to move in and exit.FORMS OF MARKETPerfect competitionMonopolyMonopolisticOligopoly complete(a) COMPETITIONPerfect competition is a market situation where self-aggrandising number of buyers and sellers exist. In this market, firm is a price taker whereas Industry is the price maker.FEATURES OF PERFECT COMPETITIONLarge number of sellers and buyers exist in perfect competition. resembling products are sold in this market where the price may increase or decrease but for the whole industry other it go out be a given price.In this market, price remains alike for two reasonsHomogeneous productsPerfect competitionFirms are free to enter and exit.Price = average revenue = marginal revenue because of price uniformity.Price has no role to play due to homogeneous life-threatenings. Price remains uniform but not constant. Example stock market. Non-price competition is not possible as the products are homogeneous, advertising, promotion and branding help the firms to differentiate and create niche in the market.D SP=AR=MR=DS DINDUSTRY FIRMFigure 1.1-Price determination under perfect competitionMONOPOLY MARKETIt is a market situation where a single seller exists with a large number of buyers and no nigh(a) substitu te is acquirable of monopoly product.FEATURES OF MONOPOLY MARKETSingle seller exists in monopoly market with large number of buyers.Close substitutes are not available of the monopoly products as it may work as an obstruction for the growth of the monopoly product.Entry of upstart firm is very difficult in monopoly market. The existing monopoly power exit take all legal as well as illegal concepts to stop the entry of new firms.Price discrimination is one of the roughly striking features of a monopoly market. It may be defined as charging different price from different customers for the same product on the basis of segments of consumer, quantity to be purchased and degrees of elasticity of demand.Selling cost or cost of advertisement is negligible.Demand curve facing a monopoly firm is downward tilt but less elastic and MR is always less than AR.PRICEMR AR=DQUANTITYFigure 1.2-Demand curve under monopoly marketPrice leadership is nonplus in monopoly as the firm can charge a hi gh price and take the advantage of being a sole seller but they can charge a reasonable price because it helps in commodious run growth. In the long run, new firms may enter the market and the existing firms market share may fluctuate. So in their own interest monopoly firm charge a reasonable price.monopolistic COMPETITIONIt is a market situation where elements of both monopoly as well as competition coexist together and differentiated products are sold in the market.FEATURES OF MONOPOLISTIC COMPETITION MARKETVery large number of buyers and sellers exist. This is a virtual market which exists in reality.Differentiated or heterogeneous products are available in this market. Each seller is selling different products from others creating a monopolist tendency.In this market, price always remains in a very close range as the commodities are perfect substitutes of each other.The demand curve facing the monopolistic competition market is again downward sloping but more elastic.In this m arket MR curve is always less than AR i.e. the additional revenue get is always less than the average revenue.Firms are free to enter and exit.Price competition is there in monopolistic competition market. Because of the availability of close substitutes, a change in price of one product affects the demand of other product.PriceAR=DMRQuantityFigure 1.3-Demand curve under monopolistic competitionNon-price competition under this form of market is possible due to availability of close substitutes of the product. The firm in order to attract more customers and retain them would compete with each other on the basis of non-price factors on promotional front i.e. advertisement etc. However, the elements of price competition are also present in this form of market but the price always keeps in a very close range.Example, Once Coke increased its price from Rs.20 to Rs.22 in order to compete with Pepsi.OLIGOPOLY MARKETIt is a market situation where few sellers exist with large number of buye rs and both homogeneous as well as heterogeneous products are available. There is intense competition among them as far as price and issue policy is concerned.FEATURES OF OLIGOPOLY MARKETThe number of sellers are more than 2 and less than or equal to 10.Both homogeneous and heterogeneous products are sold.Both collusive as well as non-collusive form of oligopoly market exists.The demand curve in oligopoly market is very difficult to determine (Indeterminate demand curve).There is non-price competition in collusive oligopoly and price competition in non-collusive oligopoly. The demand of other firms is determined by the price variation of any of the existing firms. Until and unless the rivals reaction is not known when there is a change in price, the demand curve cannot be determined.Lets discuss the concept of elasticity so that we can know approximately the different degrees of elasticity in various forms of market. snapElasticity is the degree of responsiveness for a trade good to a change in its price. Elasticity measures the sensitivity of one variable to another. When a consumer is giving reception to the price change he is more elastic whereas if a consumer is not giving response to the price change, he is less elastic.DIFFERENT TYPES OF ELASTICITYPrice Elasticity of DemandPrice elasticity of SupplyIncome elasticity of DemandCross ElasticityMEASUREMENTElasticity can be measured by following three methodsProportion method/percentage methodGeometric method/point elasticity methodExpenditure or total outlay methodTerminology of elasticityTermnumeric measure of elasticityVerbal DescriptionPrice elasticity of demand(supply)Perfectly or completely deadZeroQuantity Dd(supplied) does not changes as price changesInelasticGreater than zero, less than oneQuantity Dd(supplied) changes by a smaller % as does priceUnit ElasticityOneQuantity Dd(supplied) changes by exactly the same % as does priceElasticGreater than one, but less than infinityQuantity Dd(supplied) changes by a larger % as does pricePerfectly, completely, or infinitely elasticInfinityPurchasers(sellers) are prepared to buy(sell) all they can at some price and none at all at an even higher(lower) price.Income Elasticity of DemandInferior goodNegativeQty dd decreases as income increasesNormal good affirmatoryQty dd increases as income increasesIncome-inelasticLess than oneLess than in proportion to income increaseIncome-elasticGreater than one much than in proportion to income increaseCross Elasticity of DemandSubstitutePositiveQd of some good and price of a substitute are positively relatedComplementNegativeQd of some good and price of a complement are negatively relatedCOMPARISON OF MARKETS ON THE BASIS OF ELASTICITYMarket formsPrice elasticity of demandPerfect competitionThe demand in perfect competition is perfectly elastic which means with or without change in price, quantity demanded may increase or decreases to any extent.MonopolyThe demand in monopoly market is less ela stic. A change in price will not affect the demand by much. As there is only single seller in monopoly market, buyers do not have much options in front of them therefore the demand is less elastic.MonopolisticThe demand is more elastic in monopolistic competition. It simply means that as soon as there is a change in price, there will be a greater change in quantity demanded. The demand curve facing a monopolistic competition is downward sloping but MORE ELASTIC.OligopolyIn oligopoly market, the demand curve can be both more elastic and less elastic depending upon the rivals reaction to change in price.CONCLUSIONIn current market scenario, most firms compete on the basis of non-price competition. Though there are some discrepancies in the prices charged by different firms, firms most often prefer and follow non-price competition because it leads to consumer welfare as well as firms profit in long run.PART III visited Reliance Fresh (a departmental store) in order to conduct a resear ch on embellish cleanup spot detergents.As I entered the store I observed that on the left hand side there is a rack with flipper shelves on which all the toiletries items are displayed. Floor cleaning detergents are kept on three velocity shelves of the rack. Adequate space is provided for the radical cleaning detergents and they can be seen easily from both sides of the rack. Glass cleaning detergents are also put along with floor cleaning detergents. On the topmost shelf, DOWSIL which is the in folk brand of reliance chemicals is putted. The store is promoting DOWSIL because the profit margin is high as compared to other brands as it is a product of reliance chemicals. And they are giving a complementary floor cleaning brush with DOWSIL in order to attract larger number of customers. It is priced lower than other brands available.BRANDSI saw six floor cleaning detergent brands that were available. They areLIZOLDOMEXCIFEasy off bangMr MuscleDOWSIL perfumed floor cleaner(phen yl) friendshipFLOOR CLEANERSVARIANTQUANTITYAMOUNT(Rupees)RECKITT BENCKISERLIZOLBLUE975ML99.00BLUE500ML52.00PINK FRAGRANCE500ML54.00 lowlife EXPLOSION500ML54.00BEACHPOWDER (LIQUID)500ML50.00HINDUSTAN UNILEVERCIF500ML78.00250 ML53.00120ML27.00HINDUSTAN UNILEVERDOMEXWHITE500ML54.00WHITE1 LTR108.00HINDUSTAN UNILEVERDOMEX 2IN 1BLACK500ML50.00SC JOHNSONMR. MUSCLE(floor cleaner)500ML50.00RECKITT BENCKISER unaffixed OF BANG400ML65.00RELIANCE CHEMICALSDOWSIL PERFUMED1LTR662LTR1493LTR250I asked consumers some questions such asHow do you necessitate your floor cleaning detergent?Do you go by advertisement, if yes what are the features that attract you the most?This helped me to come to these inferencesPeople go by experimental ads i.e. the ads which actually show how their product is different from others and the offers that they are get such as buy 2 and get 1 free.Price, encase and product quality matters for them but they dont know much about the ingredients.Here the demand of floor clea ners goes on change magnitude with the cost, packaging changes and the attractiveness of the advertisement.In my observation I can say that the floor cleaning detergent market is an oligopoly market structure because there are only 6-7 main players present in the market turn considered individually. Entry is relatively easy but each brand is a different product in itself, hence even though firms are competing with each other each one is a monopoly by itself.ECONOMIC CONCEPTS BASED ON OBSERVATIONPrice and non-price competitionAll the brands compete with each other. The competition is price and non-price depending upon the elasticity. The brands mainly compete with brand differentiation. The different brands fight with packaging, new innovation and advertisements. So here we can say the floor cleaning market is having mainly non price competition as the prices are relatively same. On the other hand, topical anaesthetic in-house brands are competing on price they are placing themsel ves relatively cheaper than others in order to increase their salesThe competition here determines the place and position of the firm which is named as producer.Elasticity of demandThe demand in floor cleaning detergents market is more elastic i.e. if one brand increases its price, demand for other brand increases as it is consumers behaviour to shift to substitutes when price of a particular product increases.Packaging and product qualityThe market share depends upon the amount of work the firm puts on in differentiating its product from the other ones. For example when seen the differentiation LIZOL and DOMEX are coming in many variants which gives consumers a all-encompassing choice of variants according to their need. They are focusing more on packaging and product quality. This helps in increasing the demand of a particular brand. So we can say that here DOMEX has created its monopoly in the market till the time another firm gets into this very idea i.e. responds to it with i ts product with some new innovation in this segment of the consumer to challenge its monopolyWhen this happens the players in the market get into competition again introducing new product with some new difference.Pricing strategyBig brands such as DOMEX and LIZOL are following price glide policy as they are relatively charging high prices than other brands in order to skim the market.On the other hand, there are some local brands such as DOWSIL which are competing with other brands on price. They are following price penetration policy. As compared to other brands, these brands are relatively cheaper.CONCLUSIONThis floor cleaning detergents market actually is a good field to study the economic concepts like market structure, elasticity and competition, and cost factor.According to me, this segment of the market is catering to the high income consumers, there is non-price competition. Since here consumers are less-price sensitive and are affected by the advertisements or product deve lopment undertaken by the firm. Hence, we do not see much price competition in this segment. But there are some local players who are competing with other brands on the basis of price. Instead firms catering to this segment only try to price themselves as cheaply as possible to attract the maximum number of consumers.In this survey, I have tried my level best to touch up on the different economic aspects that are plethoric in the floor cleaning detergent market.