Cigarette Oligopoly

Cig artte Oligopoly Market Chayleen Marquis Benedictine University Author business This research is being submitted on May 2, 2010, for Professor Raymond Bells MBA 611 mannikin at Benedictine University by Chayleen Marquis. The cig atomic number 18tte grocery store is unmatchable that is known to everyone. From magazine ads to constructive commercials people have been exposed to this foodstuff place starting at a young age.The constant visuals of the advertisements as fountainhead as the costless denote that occurs daily with people smoking extraneous their office, in their car, and outside the night life scene the rump commercialize has a benefit of using the uncaring advertising as a benefit to their company at no cost. The pouf grocery storeplace place is a clear example of an oligopoly market beca single-valued function it is mostly run by a few great(p) firms such as Philip Morris USA, Commonwealth Inc, Lorillard Inc and Reynolds Ameri git Inc. receivable to the incident that an oligopoly market is hard to not sole(prenominal) come into nevertheless also basically giveled by these large firms any refreshed contention is press release to have a difficult time entering this market, being profitable in comparison to these firms and really having any type of phrase in the price or the output. A benefit of being an oligopoly is the fact that the prices are not determined for them barely the larger firms more than or less make the prices in reflection of the coordination amongst each another(prenominal).Essentially the large firms come together and decide what price they would like to see and hence all of the cigarettes cost the same amount across the board. Of course one concern that oligopolys must make sure that they are not be involved with is price fixing. Price fixing is when the competitors of a market fix the yield price to avoid disceptation within their market, ro single-valued functionarm at the same time not be ing fair to the consumers of the product in regards to the price.The price fixing does not forever happen betwixt the competitors but it also green goddess be a factor 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 completely control the market. However in an oligopoly the main firms each have a stately product brand that sets them apart from their competitor change surface f it is in the smallest difference. These brands allow each firm to stake claim on consumers in a memorable way to keep consumers access back for more. In reference to the cigarette oligopoly most consumers have smoke 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 drips their prices another firm is more l ikely to drop their prices as well to not only stay competitive but to also retain their market share.However if a firm were to growth their prices the other competing firm will not like raise their prices seemingly to effort and maintain as well as try to emergence their market share. Price increasing is not something that occurs often in an oligopoly market which in turn makes the market inelastic in regards to price change. The use of the mealy possibleness is commonly used in oligopoly markets such as the cigarette industry. do moves in the market without fully knowing how your competitors are going to respond and knowing that if one move that is made can definitely benefit all firms is a tough task to attempt. Making a decision that could help out the companies is not always going to be perceived by the other companies and can back fire on the company who makes the initial decision which in turn would have them more than likely with a net loss. In the cigarette oligopoly market I see advancement as a game theory used between 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 customer and even gets some consumers to switch products. An example would be from Camel cigarettes to Marlboro cigarettes. As mentioned before 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 extents 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 command a free t-shirt. The competing firms do not know when competition is always having a promotion such as the ones mentioned above and co uld see a decrease in sales during a competitors promotion or even right after one. Another example of the game theory used in the cigarette oligopoly market is when purchasing 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 longer period of time. In the cigarette industry I believe that profit has been maximized. in that respect are not a lot of changes that can keep occurring in this industry that can great greater profits than the ones occurring right now. in that location 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 complicated market with a product that has been sold the same way for historic period and years people dont want it to change. The only profit the cigarette industry is going to see is when prices rise easy due to infla tion. Other than taxes being enforced by states and the federal judicature the price for a pack 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 profitable market that has turn up 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 ability to use consumers for free advertising this market has saved money in the merchandise department which usually helps fight law suits but still keeps its consumers coming back for more each week.The amount for a pack of cigarettes straightaway is between four and five dollars and for the amount of smokers that casually smoke to the habituated smokers who go through a pack a day the cigarette market is not going anywhere and profits they are sightedness are simply astounding. References Thomas, C. R. , &038 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