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Differentiating Between Market

Structures
ECO/365
OCTOBER 19, 2015

Differentiating Between Market


Structures
Competitive balance between market
structures distinctive in each industry.
The characteristics of a market will give
you an idea of as to the type of market
you are working with. For this
PowerPoint slide I will be focusing on
Jacobs Engineering Group. The
company operates in a variety of
industries mainly focused on the
technical service industry.

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Market Structure
The market structure can be defined by the
number of firms; negotiation strengths in terms
of ability to set price; the amount of
concentration among them; the amount of
differentiation and individual products; and the
ease or difficulty of entering and exiting the
market.

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Oligopoly Characteristics

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In Oligopoly you would find


only a small number of sellers
that is few enough that any
individual can affect the
market.

Ability to set own prices

Jacobs Engineering Group is one of only


a few firms that dominate their industry.
This means that it cannot be a
Monopoly because there are multiple
firms and it cannot be perfect
competition because there are few
companies competing. Monopolistic
Competition is also ruled out because
there aren't many firms competing with
similar products/services.

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Jacobs Engineering
Group

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Strategic Decision Making Taking explicit account of a


rivals expected response to a
decision you are making.
(Colander, 2013)

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Strategic Decision
Making

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Competitive Strategies
In oligopoly, a price
competition can turn into a
price conflict reducing
profits. If one firm decides
to increase its price, the
other firms may not follow
and in turn the other firms
will gain the customers. The
firm that raised prices will
see a drop in quantity
demanded, i.e. the demand
is more elastic when the
firm decides to increase
prices.

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Competitive Strategies
If a firms in an oligopoly
market structure decided to
drop their prices, the other
firms know that they will
lose a lot of market shares if
they dont drop their prices,
so they drop their prices as
well. Because most
customers are comfortable
where they are, the
company that dropped the
prices in the first place will
see very little increase in
demand so the demand is
inelastic.

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Recommendations
Engineering Group
should make the decision
to work together with other
firms and make their
services inelastic. By
adding a larger variety of
services and making it
unique, Jacobs Engineering
Group will proceed in
making profits.

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Jacobs

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Recommendations

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In the technical service


industry, Jacobs Engineering
Group is 2nd the leader when
it comes to its ranking.
Jacobs Engineering Group
was in line to collaborate with
a large Engineering, Design
and Construction firm URS.
The alliance would have
given Jacobs Engineering
Group the added value of
making it unique. AECOM
being a larger company
bought URS.

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Conclusion

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Oligopoly is a common economic system in


todays society. The technical service industry is a
great example of an oligopoly market structure
due to the small number of firms, ability to set
prices, barriers that make it difficult to enter the
market and having either identical or
differentiated products.

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