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The Cola Oligopoly Essay

1513 words - 6 pages

AbstractThis project focuses on the results of a market structure simulation and a product I am familiar with. I am to discuss the advantages and limitations of supply and demand that are identified. I am then to create a table showing the differences and then I am to discuss a product we are familiar with so I chose the soft drink/cola industry.IntroductionThis project focuses on the market structure of a freight transportation company. They go through several changes for each of their divisions. Each division represents a different market structure. I will learn about perfect competition, monopoly, monopolistic competition, and oligopoly. The divisions used in the simulation are the Consumer Goods Division, Coal Division, Chemicals Division, and Forest Products Division.What are the advantages and limitations of supply and demand identified in the simulation?The company of East-West Freight Transportation consisted of four differnet divisions that represented different market stuctures as shown in the following table. There were advantages to the supply and demand in different scenarios. The coal division was the only transporter in the region and the chemicals division has a chance for profits in the long run. The consumer goods division has no barriers to entry for firms and the forest products division has very little to no presence of economic profits.Simulation TableExample of a firm Barriers to Entry Numbers of Firms Price Elasticity of Demand Presence of Economic ProfitsPerfect Competition Consumer Goods Division No barriers Several Price is elastic P=MR.=MCMonopoly Coal Division Only transporter in region 1 Price is inelastic Possible is barriers existMonopolistic Competition Forest Products Division Few barriers to entry Many Price is elastic NoneMonopoly/Duopoly Chemicals Division Only two firms and each reacts to each other. East-West to Far Wide. 2 Price is elastic Some in the long runThe Cola WarsAn industry structure with a small number of large firms producing products that ranges from highly differentiated to standardized is an oligopoly. The world's soft drink market is dominated by two main players; Coca Cola and Pepsi Cola. Despite the fact that Coca Cola was founded almost 80 years before Pepsi Cola, they have both become the leaders in the soft drink market. Even though they produce beverages other than cola, they have been successful throughout their existence because of their names and their ability to promote their products. A focus on Shanghai, China, offers a clear understanding of the way these companies work, think and act. Coca Cola being 'The Real thing', more than a century old, 'Always Coca Cola', considering their past and their methods of being successful in the market, which as they say, has never changed. Pepsi, 'The Challenger', even now poses as the brash, young upstart and is to be the drink for the younger generation.Market StructureThe cola industry is chiefly an oligopoly. The main players that control...

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