Maximizing Profits in Market Structures

Market structure profit maximizing the profitability of the market structure Competitive market The basic feature of market competition is that many suppliers basically offer one of the same goods or services. As there are so many suppliers and so many consumers it is impossible to affect market prices with only one supplier. Each supplier or price recipient is always affected by current market conditions. (N. Gregory Mankiw, 2010, p. 290). With this market structure, suppliers of competitive markets will need to make consumer products and services more desirable than their closest competitors.

But the market does not "maximize" (and does not intend to do so). All participants in the market are working hard to maximize profits. That is the same thing that all consumers in the market are trying to do for their own benefit, that is to obtain the lowest possible price. The market is a mechanism to achieve this balanced behavior. Therefore, the market may be regarded as an institution that reduces profits. More precisely, lowering the price to produce a sufficient return on investment rather than average

Companies typically focus on maximizing profit, not maximizing customer value. Peter Doyle pointed out in his value-based marketing book that maximizing profits leads to short-term planning and marketing investment, increasing interest in sales, market share and current profits. The concept of (Doyle, 2000) reduces competitiveness over the long term. It eliminates opportunities in new markets. The company ignores the fact that the actual investment of the company depends on brand management, customer relationships, partnerships, and market knowledge.

As with companies with other market structures, monopolists maximize profit when MC = MR. In the short term monopolists can usually generate the following gains, normal gains or special gains. However, in the long run, due to obstacles in the entry of the new company, the special benefits generated by monopolists will not be reduced. For monopolists with normal or abnormal profit in the short term they will receive special benefits in the long run. Perfect competition is a market where there are many buyers and sellers, the products are homogeneous, and the seller can easily enter and leave the market. The monopoly is a market structure with a single seller, a large number of buyers and sales products, no close substitutes, and a high barrier to entry and exit. Exclusive competition is a market structure that allows many small sellers to sell differentiated products and to enter and exit the market.