Principles of Microeconomics (Eco 204)
Instructor Steve McQueen
September 19, 2011
Even though it is in my belief that when we have all this competition that it will make everyone really think about what is best for them and the economy. And another thing is that if we really think about it we are trying our best to help other countries try to get on the same wave length and us but if we do all the work for them then they will depend on us all the time., If we did not have economics here in the United States or anywhere around the world then we would not know what is going on in the world. With these different types of businesses here in the United States it keeps us updated on what is going on in the world, and here in the Untied States of America we have what is called oligopoly and monopolies. Promotions are important tools for matching supply and demand in many industries. In the United States automotive industry, promotions are frequently offered, which may be given directly to customers (rebates) or given to dealers (incentives) to stimulate demand. We analyze the performance of customer rebate and retailer incentive promotions under competition. We study a setting with two manufacturers making simultaneous pricing and promotion decisions, and with two price-discriminating retailers as Stackelberg followers making simultaneous order quantity decisions. In the benchmark case with no promotions, we characterize the equilibria in closed form. We find that retailer incentives can be used by manufacturers to simultaneously improve each of their profits but can potentially lead to lower retailer profits. When manufacturers use customer rebates, we show that a manufacturer is able to decrease the profit of her competitor while increasing her own profit, although she is also at risk for her competitor to use rebates in a similar fashion. Unlike the monopoly case where the manufacturers are always better off with retailer incentives, customer rebates can be more profitable under some cases in the presence of competition. Using numerical examples we generate insights on the manufacturers' preference of promotions in different market settings (Demirag, O., Keskinocak, P., & Swann, J., 2011). According to the book the perfectly competitive industry has to decide whether their resources are allocated among firms efficiently, the final products are distributed among households efficiently and the system produced the things that the people want (Case, 2009, pg. 249). To balance the equilibrium the companies have to weigh the good with the negative to make sure that everything is balanced right. A really good example of this perfect competitive has to be the Coke and Pepsi products they both have to look at who is selling more products at certain places so they know whether or not they should put a sale on the product to make the consumers drink more sodas.
The reason for this is because this is making it more efficient for the consumer and the businesses who sell those products. I also believe that no matter what size the plant they will always have to determine the price and quantity of the product that they will sell these days because the price is always the determining factor in whether or not the consumer will purchase the product. Even though I would prefer to drink Pepsi products but most of the time they do not have a sale on it but the Coke products do so I tend to drink the Coke products more because I am basically saving money that way also. Another reason why I tend to drink the Coke product is for the simple reason that I want to drink what my driver in Nascar drinks which is Coke products though it is a lot cheaper than the Pepsi products.
Knowledge of factors generating a negative influence on the state of an economy allows one to find mechanisms of decreasing such influences. It is precisely the phenomenon of monopolism in an economy that is such a destabilizing