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    Oligopoly

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    jasmine722
    The US mobile phone service industry is an oligopoly dominated by 4 main companies: AT&T, Verizon, Sprint, and T-Mobile. These companies observe and respond to each other's pricing and non-pricing strategies to attract and retain customers. For example, when Verizon introduced a $100 flat-rate plan, AT&T and T-Mobile quickly matched it. Similarly, when prices were cut, AT&T and Verizon lowered their unlimited plans to $70. Companies also use non-pricing strategies like exclusive phones and services to differentiate themselves.

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    Oligopoly

    Uploaded by

    jasmine722
    325 views2 pages
    The US mobile phone service industry is an oligopoly dominated by 4 main companies: AT&T, Verizon, Sprint, and T-Mobile. These companies observe and respond to each other's pricing and non-pricing strategies to attract and retain customers. For example, when Verizon introduced a $100 flat-rate plan, AT&T and T-Mobile quickly matched it. Similarly, when prices were cut, AT&T and Verizon lowered their unlimited plans to $70. Companies also use non-pricing strategies like exclusive phones and services to differentiate themselves.

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    The US mobile phone service industry is an oligopoly dominated by 4 main companies: AT&T, Verizon, Sprint, and T-Mobile. These companies observe and respond to each other's pricing and non-pricing strategies to attract and retain customers. For example, when Verizon introduced a $100 flat-rate plan, AT&T and T-Mobile quickly matched it. Similarly, when prices were cut, AT&T and Verizon lowered their unlimited plans to $70. Companies also use non-pricing strategies like exclusive phones and services to differentiate themselves.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    325 views2 pages

    Oligopoly

    Uploaded by

    jasmine722
    The US mobile phone service industry is an oligopoly dominated by 4 main companies: AT&T, Verizon, Sprint, and T-Mobile. These companies observe and respond to each other's pricing and non-pricing strategies to attract and retain customers. For example, when Verizon introduced a $100 flat-rate plan, AT&T and T-Mobile quickly matched it. Similarly, when prices were cut, AT&T and Verizon lowered their unlimited plans to $70. Companies also use non-pricing strategies like exclusive phones and services to differentiate themselves.

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    How do businesses decide what price to charge the customer for their products and services?

    How do they decide what to produce and or how much should be produced? These decisions mainly depend on the type of industry in which the business operates. In the United States, economists classify industries into four different market structures; pure monopoly, pure competition, monopolistic competition, and oligopoly. Understanding each of the four market structures allow manufacturer to manage its pricing strategy and production output. This paper will differentiate among those four market structures, while identifying pricing and non-pricing strategies used by the company within each market structure. Oligopoly US mobile phone service industry is a perfect example of an oligopolistic industry. In this industry, companies are providing the same kind of service, but are also trying to differentiate themselves to attract more customers. The mobile phone service market was dominating by AT&T, Verizon, Sprint Nextel, and T-mobile with over 86.7% of market share in 2007 and 82.5% market share in 2008. The two main players were AT&T with 71.3million subscribers and Verizon with 67.2 million subscribers. Since there are only four firms that are dominating the market, the companies are aware of the actions of others. For example, in 2008, Verizon introduces its $100 a month flat-rate plans. The plan includes unlimited calling and internet usage. One week after the new release, AT&T and T-mobile also announced their new flat-rate plan which is similar to Verizons plan. AT&T charges $99 a month and T-mobile charges $99.99 a month. In January 2010, AT&T and Verizon both announced that they are dropping the cost of its unlimited calling plans from $100 a month to $70 a month with the same feature. This is an action responding to T-mobile and Sprints price cut strategy late last year. Non-pricing strategies are always used within the competition in oligopoly market structure. AT&T contracted with Apple and introduced an AT&T exclusion Smartphone, iPhone. By the end of 2008, AT&T has signed up 7 million iPhone users and 40% of them are new users. Recently, Verizon announced the mobile version of Skype for its BlackBerry and Android handset user. Sprint and T-mobile both concentrate on free or very low price Smartphone. In an oligopoly market, it is competition among the main players. Each player will have to act fast to counter the other opponents strategy to maintain its current market share and revenue.

    Year

    AT&T

    Verizon

    Sprint Nextel

    T-Mobile

    Other

    2007 (Snapshot Report) 2008 (www.billshrink.c om)

    27% 25.9%

    26.2% 21.5%

    22.1% 17.3%

    11.4% 17.8%

    13.3% 17.5%

    References (2008). Verizon, AT&T, T-Mobile introduce flat-rate plans. Inside Tucson Business, 17(38), 4. Retrieved from MasterFILE Premier database. Bill Shrink. (n.d.). Wireless Carrier Compare T-Mobile-vs-AT&T Wireless-vs-Sprint-vsVerizon Wireless. Retrieved from http://www.billshrink.com/cell-phones/carriercompare/index.html Lamiman, K.. (2009, September). AT&T Inc. Better Investing, 59(1), 30-31. Retrieved May 7, 2010, from ABI/INFORM Trade & Industry. (Document ID: 1837836911). Niraj Sheth. (2010, January 16). Corporate News: Verizon, AT&T Escalate Pricing War --Carriers Race to Drop Calling-Plan Prices, But Require More Customers to Pay for Data Services. Wall Street Journal (Eastern Edition), p. B.5. Retrieved May 7, 2010, from ABI/INFORM Global. (Document ID: 1940816281). Snapshots US Mobile Phone Services 2008. (24 January). The Snapshot Series. Retrieved May 7, 2010, from Snapshot Series. (Document ID: 1507993381). Verizon Wireless Launches Skype Mobile on Phone Devices. (2010, March 17). Extra. Retrieved May 7, 2010, from ProQuest Newsstand. (Document ID: 1995331641).

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