How Will a Firms Pricing Strategy Depend on the Structure...

How will a firm’s pricing strategy depend on the structure of the market? A pricing strategy is important to any firm in realising its corporate objectives, whether that be its sales revenue, market share or indeed profit, and thus there is much preoccupation within a business about its pricing strategy. Ultimately, this will be guided by many factors; not least the market power it has to set the price of its products and the nature of the demand curve it faces. This essay will attempt to outline how a firm’s pricing strategy is influenced by the characteristics of the market in which it operates, looking at various market structures, including perfect competition, monopoly and oligopoly. One particular market structure worthy of†¦show more content†¦In addition to this, the markets themselves to be distinct from each other so as to prevent consumers from the lower-priced market reselling the product in the high-priced market. Typically, rail operators have charged cheaper off-peak fares to the elderly and students, who have lower disposable incomes and are more price sensitive than other user groups, in order to stimulate demand from sectors that would not otherwise use it. Figure 2: P P MC MC MR D MR D Q Q Alternatively, maybe a firm operates in a market where it has a large share but competes against small producers possessing a small market share. In effect, the dominant firm has to split the market demand with these small firms, each producing an identical product to the dominant firm and act as perfect competitors, taking the market price as given by the dominant firm and choosing a level of outputShow MoreRelatedStructuring Corporate Financial Policy: Diagnosis of Problems and Evaluation of Strategies1258 Words   |  6 PagesSuccessful diagnosis and prescription depend heavily on thoughtful creativity and careful judgment. Three basic stages in that process: 1. 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