Market realities and the maximalization of consumer good Essay

Market realities and the maximalization of consumer good - Essay Example For purposes of definition,a monopolistic competition will be defined as a type of competition that is defined by the fact that only one business or individual can provide the needs of the larger economyConversely, oligopolistic competition will be one in which only a few very large companies offer the given good or service to the market. Likewise, due to the fact that so few players exist within the oligarchic model of competition, it is easy and often common for them to cooperate in order to stifle any entrants to the market. As a function of seeking o understand each of these models to a greater degree, the forthcoming analysis will seek to provide the levels of differences that exist between the two as well as showing some figures that illustrate the ways in which the market behaves under these different models of competition. Lastly, a value judgment will be made with respect to which of these is the best model of competition to maximize consumer good within the economy. Althoug h it is useful to seek to provide a contrast between the two so that the reader and/or researcher can best judge how these two forms of competition act within the given economic system, there are a level of similarities between the two that cannot be ignored. In both of these models, the consumer is at a price disadvantage due to the fact that the price maker(s) is holding almost all of the power and has the ability to set the price according to non-market regulated means. (Lu, 2011). Likewise, also from the consumer’s perspective, the level of selection of goods or services between both models is similarly constrained. Due to the fact that one or a handful of firms are holding the means of production and/or distribution firmly within their grasp, the availability of substitutes is greatly diminished (Marini & Zevi, 2011). Conversely, the differences that exist between the two market realities also help to differentiate the two models. The first of these revolves around the f act that a monopoly allows for much lower level of consumer choice than does the oligarchic system. Although both systems necessarily constrain the choice to the consumer, it is impossible to consider a situation in a monopolistic model in which a price war would take place (ZHELOBODKO et al, 2012). Conversely, although rare, price wars can and do take place within the oligarchic model due to the fact that a particular firm or group of firms may seek to leverage an advantage and further reduce the competition by driving one of the participants out. Figure 1 and 2 below seek to point out the key means by which monopolistic and oligarchic competition affects the supply and demand curves of the traditional representation of the economy. Due to the ways in which these are warped from the standard representations, the reader can gain a degree of inference with respect to how these effects will be passed along to the end consumer within the markets. Figure 1.0 Oligarchic Competition Figur e 2.0 Monopolistic Competition Consequently, the reader and/or researcher can understand that with regards to the maximizing the good of the consumer, the oligarchic model is most appropriate due to the fact that although it provides the consumer with only a few options between firms or between products, it necessarily exhibits a greater level of offerings than does that of monopolistic competition. Moreover, due to the fact that the firms within an oligarchic system compete, at least to a small degree, some utility is able to maximized on behalf of the consumer (Essen & Hankins, 2013). This is a function of the fact that the monopolistic system is the price maker and the consumer is the price taker. Although one can argue that in the oligarchic system the same is true, the fact of the matter is that it is reduced due to the reality of the small level of continuing and ongoing competition that is present. Though few realistic examples exist within the world with regards