Best Market Structure for a Pipeline to Function In

BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 1

Hello Angela, For Deliverable 5, you were asked to submit a 2 page report detailing the current market structure and the anticipated market structure after the pipeline is built. You were also asked to include tables to show the characteristics of each of the above market structures and where our firm conforms or does not conform to the characteristics of the different market structures. Finally, you were asked to explain the impact on price and quantity and any pertinent changes to the firm’s pricing strategy after the change in market structure. Below you will find detailed comments regarding how your work was graded. Please let me know if you have any additional questions regarding how your work was graded. Marlo

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Did not Submit No Pass Competence Proficiency Mastery

Not Submitted Introduction and/or conclusion did not summarize the current and future market structures.

Introduction and conclusion summarized the current and future market structures.

Introduction and conclusion summarized the current and future market structures, using clear supporting evidence.

Introduction and conclusion summarized the current and future market structures, using clear supporting evidence and a well- defined synopsis of the report goals.

Not Submitted Explanation of current market included, but unclear or incorrect.

Explanation of current market is correct.

Explanation of current market is correct, using clear examples.

Explanation of current market is correct, using clear examples and well-defined reasons for proposal recommendation.

Not Submitted Explanation of anticipated market included, but unclear or incorrect.

Explanation of anticipated market is correct.

Explanation of anticipated market is correct, using clear examples.

Explanation of anticipated market is correct, using clear examples and well-defined reasons for proposal recommendation.

Not Submitted Table of characteristics included, but unclear or incorrect.

Table of characteristics is correct. Table of characteristics is correct, and written explanation used clear examples.

Table of characteristics is correct, using clear examples and well- defined reasons for proposal recommendation.

Not Submitted Explanation of changes to price, quantity, and pricing strategy included, but unclear or incorrect.

Explanation of changes to price, quantity, and pricing strategy correct.

Explanation of changes to price, quantity, and pricing strategy correct, using clear examples.

Explanation of changes to price, quantity, and pricing strategy correct, using clear examples and well-defined reasons for proposal recommendation.

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BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 2

Best market structure for a pipeline to function in

Angela Petersen

Rasmussen College

Author Note

This paper is being submitted on February 7, 2019, for Audra Sherwood’s, Managerial

Economics course.

Best Market Structure For A Pipeline To Function In

Market structure.

BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 3

In the current world the type of market that exists in the oil company sector is a monopoly. Why

a monopoly? Because, there is one supplier for the entire market which is our company. Hence

the firm is the industry. In this market there are many buyers and a seller known as a monopolist

therefore there is no competition in the market. Moreover the commodity being supplied has no

close substitute that will pose competition. As a result prices are fixed by the company which

indeed has the monopoly power and this often results to price discrimination upon the consumer.

When we complete this pipeline project we will have entered the monopolistic market and as a

result the market structure will absolutely be forced to change since we will be the second firm to

enter the industry. The market structure will be forced to change to oligopoly market. Oligopoly

is derived from a Greek word Oligo means few hence oligopoly is therefore a market structure

where there are few firms. This will give us an added advantage where we will use the loopholes

to take control of the market by standardizing the price and we will be able to compete favorably

with the existing company.

Oligopoly Market Structure

Monopoly Market Structure

Commented [MC1]: NEEDS REVISION: You were asked to provide an accurate explanation of the current market structure, using clear examples and well-defined reasons for proposal recommendation. Your response is inaccurate since oil companies always exist in market structures that are heavily concentrated, producing a good that reflects inelastic demand.

Commented [MC2]: NEEDS REVISION: You were asked to provide an accurate explanation of the anticipated market, using clear examples and well-defined reasons for proposal recommendation. The future market structure assumption is inaccurate since the single pipeline would assume 1 firm in complete control of the pipeline production market.

BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 4

Characteristics of the monopoly and oligopoly Market Structures

Monopoly Oligopoly

There is only one supplier for the entire

market, hence the firm is definitely the

industry.

There are a few suppliers and many buyers.

There is price discrimination since a firm has a

monopolistic power.

There is price rigidity since all firms in the

market faces a kinked curve.

The prices are fixed by the sole supplier. The prices are determined by the firms in the

industry.

The sole company enjoy all profits There is conflicts among the companies as they

fight for the profits.

The commodity supplied lacks close

substitutes.

The few suppliers enjoy a monopoly type of

power amongst themselves.

According to [Baumol, 1961; Yadav, 1995] the characteristics of the monopoly type of

market our company already faces a big challenge where it is difficult for other firms to enter

BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 5

into the market because for example the added costs the company will incur or because the

existing company may be enjoying a large economy of scale. To enter the market as you can

clearly see requires an art of planning. To my opinion building a railway line as already proposed

is a good ideabecause our company will be able to command a bigger size of the

market.(Horowitz, 1981; Belk, 1975.] The result would be that we will pose competition to the

OPEC company that is dominant currently by first offering affordable prices hence more

customers will prefer to associate themselves with us since we will have offered them a better

alternative.

An oligopoly describes a market structure which is dominated by only a small number

of firms. This results in a state of limited competition. Our company will have to take advantage

to gain economic power in the market since there will be only one big threat .It will also mean

we will have an equal chance to make profits and with time we may even overtake the current

monopoly. If we keenly analyze this matter we will discover that the pipeline will cater for

transportation hence the consumers will not have to hire trucks to collect the oil hence this will

be an added advantage to the consumers who are located far away from the refinery company

and this will be a big blow to the existing company.

References

BEST MARKET STRUCTURE FOR A PIPELINE TO FUNCTION IN 6

Blandina, A. (2018). Can you hear me now? The moderating effects of procedural justice within

consumer-brand relationships.

Challenges to Urban Transport Sustainability and Smart ... (n.d.). Retrieved from

https://benthamopen.com/contents/pdf/TOTJ/TOTJ-2-29.pdf