M2 (SW) RESPONSE

ORIGINAL TOPIC:

Assignment 1: Discussion—Market Structures

Industries can be classified under different market structures and this classification strongly dictates decisions made by managers within the market. For example, in an industry classified under perfect competition, or in a perfectly competitive market, many competitors offer the same product and entry into the industry is easy. In this market, the pressure to maintain the same prices as the competitors is high, which characterizes this market.

On the other extreme, some industries are classified as monopolies and some fall under monopolistic competition. In a monopoly, there is only one provider of a product or a service, which has an inelastic demand. In this case, there is little incentive for the monopoly to be efficient or price competitive. In a monopolistically competitive market, there are many firms selling a product or service that is only slightly differentiated from one another, and in the long term, these firms start showing characteristics of a perfectly competitive market.

Tasks:

Find an article about an industry in the United States, such as the pharmaceutical industry. You can consult sources such as the Wall Street Journal, Financial Times,Bloomberg Markets, the Economist, US News and World Report, and other publications for your reference.

After reading the article, respond to the following:

• Identify the market structure that best characterizes the industry described in the article.
• Explain the factors you considered when identifying the market structure for this industry.
• Analyze whether this industry will work better if it changes its market strategy and starts showing characteristics of another market structure.
• Critically analyze the advantages and disadvantages of the market structures that you studied in the readings.

STUDENT RESPONSE:

Identify the market structure that best characterizes the industry described in the article.

On April 01, 2015, Phoebe Memorial Hospital will be the only health care facility for the people in Albany, Georgia.  There were two hospitals there at the time, but Phoebe Memorial Hospital bought the company and became a monopoly in Albany, Georgia. A monopoly is an industry in which one company controls the marketplace and the pricing structure of products or services. As there is only one company and there is little or no pressure to control prices, the company is often externally regulated regarding what it can charge.  As of today, Phoebe continues to be the only hospital that provides healthcare in that area.  Prices has increased for services and the wait is longer since Phoebe is a monopoly.  There is another healthcare company that is trying to come in the area, but Phoebe is fighting it.  Hopefully, the healthcare facility will come and give Phoebe some competition.  According to Daily Kos, Phoebe is the largest employer in Albany, GA and it has a stranglehold on medical care in southwest Georgia, and it has created itself into a medical monopoly by using mafia style tactics of intimidation and, at times, just plain brute strength.

Explain the factors you considered when identifying the market structure for this industry.

A monopoly is the exclusive possession or control of the supply or trade in a commodity or service.  Phoebe Putney has full control of the people who lives in that area and some of the surrounding counties.  They can charge what they want because the community needs health care services.

Analyze whether this industry will work better if it changes its market strategy and starts showing characteristics of another market structure.

No, they will not will better if they changed their market strategy because companies like them are greedy.  They try to eliminate anyone who tried to compete with them.  As I stated previously, there is another health care facility who is trying to build their company in one of their area, but they are fighting this facility because they want all the business to come directly to them.  They are currently fighting in court to determine if the company can start to build their company in the area.  If the judge decides the company can start to build, Phoebe will have competition and just maybe lower their prices for health care.

Critically analyze the advantages and disadvantages of the market structures that you studied in the readings.

Advantages of a monopolistic competition are the following:

• There are no important barriers to entry.
• Differentiation creates diversity, choice and utility.
• The market is more efficient than monopoly but less efficient than perfect competition - less allocatively and less productively efficient. 

Disadvantages of a monopoly are the following:

• Does not create utility but generates unnecessary waste, such as excess packaging.
• There is allocative inefficiency in both the long and short run.

REFERENCES

Evans, Melanie. (April 01, 2015). FTC ends four-year fight with Phoebe Putney Health System. Retrieved from https://www.modernhealthcare.com

Topazpilot. (December 13, 2006). Phoebe Putney and the Rise of Medical Monopolies. Retrieved from https://www.dailykos.com

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