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Industry Description
In the recent past, several mergers of large firms within the oligopolistic market setting have been witnessed. As a result, this has not only caused some changes in some of market factors such as competition but also in turn affected the demand of the products. This paper discusses the competitive environment within the property industry in the United States of America.
Simon Property Group
Simon property Group is the largest Real estate Company in the United States of America. The real estate industry in the US has been characterized by stiff competition among the oligopolistic market players. Competition in the industry is high thanks to the firms that desire to control a larger market share. As such, competition has ensured that firms create strong brand names and have a commanding brand presence in the property market.
In the United States of America, there is no dominant firm in the real estate industry although Simon property Group is the largest of all other players. The real estate industry is characterized by an oligopolistic market setting where there are few dominant firms which account for a majority of the stake in the industry. There are some other firms that follow after Simon Property group. Their main competition factor in the real estate industry is price strategy.
Real estate companies engage in price wars so as to attract and retain more customers. This is done through offering cheaper deals to the customers relative to the competitors. These cheaper deals come in form of commission refunds to property buyers. Firms that fail to offer commission refunds usually attract fewer buyers than those that refund.
Two Arguments – Importance of Competition among Firms
Competition is defined as the rivalry that causes businesses to strive to have a commanding control of the limited resources among the competing parties in the market. The importance of competition comes in that firms using price as the competition factor bring their prices down so as to attract the finite rational consumers (Jerry, 2003). This factor therefore increases the consumers’ marginal propensity to consume thus increasing their disposable income.
The competitive environment in this industry is of benefit to the society. This is because of the price factor that offers the consumers cheaper deals. The importance of this is that the consumers are able to purchase property at lower prices. This ensures that their economic welfare is enhanced because they have residual cash that they can use for other uses.
The high degree of market concentration among the competitors is beneficial to the consumers because these firms will engage in competitive activities that will either result in lower prices or higher quality among the products so as to attract the consumers (Wessels, 2000). Consumers therefore enjoy high quality products from the competing firms and also spend less on these products.
Oligopoly market structure is defined as the market structure that exists when there are a few suppliers in the economy who have a considerable share of the market. However, none of these suppliers is strong enough to be a price setter. This means that the suppliers will have to forge common standards that will be beneficial to the both the consumers and the suppliers.
Industries that experience rapid technological change can benefit from an oligopolistic market structure. This is because the negative uncertainties that could be brought about by the technological changes are cushioned by the standardization practiced among the oligopolistic market structure by the various market players.
References
Jerry, N. L. (2003). Competing in The Information Age: Align in the Sand. London: Oxford University Press.
Wessels, W. J. (2000). Economics. New York: Barron’s educational Series.
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