Cigarette Oligopoly

Cig atomic number 18tte Oligopoly mart Chayleen Marquis Benedictine University agent Note This research is macrocosm submitted on May 2, 2010, for Professor Raymond doorbells MBA 611 grad at Benedictine University by Chayleen Marquis. The rear end securities indus deliver is one that is known to everyone. From magazine advertisements to constructive commercials people have been expose to this foodstuff starting at a young age.The constant visuals of the advertisements as well as the vacate advertising that occurs daily with people dope outside their office, in their car, and outside the night life scene the tail end grocery place has a benefit of using the supernumerary advertising as a benefit to their bon ton at no cost. The hindquarters market is a clear use of an oligopoly market because it is mostly run by a few large dissolutes such(prenominal) as Philip Morris USA, Commonwealth Inc, Lorillard Inc and Reynolds American Inc.Due to the fact that an oligopoly ma rket is hard to not only acquire into but also basic solelyy controlled by these large firms any bran-new competitor is going to have a difficult time entry focusing this market, being get aheadable in comparison to these firms and really having any lineament of say in the determine or the output. A benefit of being an oligopoly is the fact that the prices argon not determined for them but the larger firms more or less make the prices in reflection of the coordination amongst each other. basically the large firms come to appropriateher and decide what price they would like to view and then all of the laughingstocks cost the aforementioned(prenominal) amount across the board. Of course one concern that oligopolys must make sure that they are not be involved with is price amends. Price fixing is when the competitors of a market fix the product price to avoid rival inwardly their market, while at the same time not being dependable to the consumers of the product in regard s to the price.The price fixing does not of all time expire between the competitors but it also can be a compute between manufacturers and distributors. So as an oligopoly the firms must ensure that the price fixing is not occurring at any levels of their production. Most people look at an oligopoly market and think that they act as a monopoly because the main firms alone control the market. However in an oligopoly the main firms each have a distinguished product brand that sets them apart from their competitor even f it is in the smallest difference. These brands allow each firm to stake claim on consumers in a memorable way to salvage consumers coming brook for more. In reference to the poove oligopoly most consumers have good deal Marlboros from the beginning of their smoking career and have never strayed from the product that they know. In an oligopoly market if one firm drops their prices another firm is more potential to drop their prices as well to not only stay emulo us but to also retain their market share.However if a firm were to increase their prices the other competing firm will not like aid their prices obviously to try and maintain as well as try to increase their market share. Price increasing is not something that occurs often in an oligopoly market which in pervert makes the market in live in regards to price flip-flop. The use of the feeble theory is commonly used in oligopoly markets such as the cigarette industry.Making moves in the market without fully acute how your competitors are going to respond and knowing that if one move that is do can definitely benefit all firms is a tough proletariat to attempt. Making a decision that could help out the companies is not always going to be perceived by the other companies and can sticker fire on the company who makes the initial decision which in turn would leave them more than likely with a net loss. In the cigarette oligopoly market I control forwarding as a game theory used be tween the competing firms.Many different events are held and it seems that the cigarette firms are there to give away free samples of their new products, free t-shirts and of course creating a bond with the consumer which makes them stay a loyal node and even numbers some consumers to switch products. An example would be from Camel cigarettes to Marlboro cigarettes. As mentioned forwards advertisement is something that drives the cigarette oligopoly. With the promotions being such a market to get more and more people daily to advertise freely for the company cigarette firms use every opportunity to do so.Primarily during these promotion periods the cigarette companies will use the foot traffic to do the free advertising for them. This is an extremely smart move because in reality who does not privation a free t-shirt. The competing firms do not know when competition is always having a promotion such as the ones mentioned above and could see a decrease in sales during a competito rs promotion or even salutary after one. Another example of the game theory used in the cigarette oligopoly market is when acquire a regular firm product giving out a free ull size sample of a new product to get consumers to try it, which then leads to the consumer not having to purchase their product for a eternal period of time. In the cigarette industry I believe that profit has been maximized. There are not a lot of changes that can keep occurring in this industry that can great greater profits than the ones occurring right now. There is only so much change that the cigarette market can endure and change that I believe the market has no new product line to go to.The cigarette market is such an intricate market with a product that has been sold the same way for years and years people dont want it to change. The only profit the cigarette industry is going to see is when prices grind away slowly due to inflation. Other than taxes being enforced by states and the federal offici al government the price for a contract of cigarettes is not going to change drastically by any firm in caution of losing its market share.The competition in the cigarette market is beneficial to the consumers because of the promotions they provide with all of the free merchandise. Unlike other oligopolies the cigarette market is not elastic so price changes that would occur in other oligopoly markets that affect the consumer dont not occur in the cigarette market. Competition in other oligopoly markets can directly negatively affect the consumer but because the cigarette market is a market that change rarely happens, prices are the same regardless the brand the competition is a benefit.In conclusion the cigarette market oligopoly market is a pretty stable very paying market that has proven to stand the test of time, anti-smokers protests and even recessions. This market has a proven track record and has no intent to go anywhere. With the top executive to use consumers for free ad vertising this market has saved money in the marketing department which usually helps fight law suits but suave keeps its consumers coming back for more each week.The amount for a pack of cigarettes to sidereal day is between four and five dollars and for the amount of smokers that casually smoke to the addicted smokers who go through a pack a day the cigarette market is not going anywhere and profits they are seeing are simply astounding. References Thomas, C. R. , & Maurice, S. C. (2008). Managerial Economics (9th ed. ). New York, NY McGraw-Hill Irwin. Market Information-Philip Morris USA. (n. d. ). Retrieved April 26, 2010, from http//www. pmusa. com/ed/ cms/Company/Market_Information/default. aspx