Market Structure Classification of Apple iPhone 7
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Market Structure Classification of Apple iPhone 7
The market structure that aligns with iPhone 7 is the oligopolies. The market structure has a few numbers of sellers occupying a small market share and barriers of market entry. Also, the firms deal with differentiated or identical products. With iPhone 7, Apple, Inc. uses a retail pricing strategy. It sets its prices high to make high profits. The company uses a minimum advertised price (MAP) retail strategy (Chung et al., 2019). The policies of the technique restrict dealers and resellers such as Walmart from selling or advertising iPhone 7 below a specific minimum price. The savings percentage is so small that the retailers get a little or no profit margin and thus are unable to give customers a significant discount and end up selling at a high price.
According to Chung et al. (2019), Apple Inc. competitors include Samsung, Microsoft, Huawei, and Dell, who deal with phones too. The high cost of Apple products forces consumers to shift to competitors whose phones have similar applications. The competitors offer price discrimination. Therefore, Apple Inc. slashes its prices to retain and customers and thus affecting the profit margin of the firm. The cost of the iPhone 7 is less by $200 less since its launch. In the law of demand and supply, the firm should have different markets with varied prices of different products to balance the equilibrium.
Erren et al. (2016) state that game theory is a technique that solves decisions among competitors. Prisoner’s Dilemma occurs where companies A and B can choose to or not file a suit against each other. To evaluate the best strategy, either company should select the most profitable choice. If B files a suit, A should also file a suit to gain some income to reduce the weight of B’s lawsuit. If B doesn’t file a suit, A should go ahead and file a suit to gain credibility and ground from their nemesis. Similarly, B should file a lawsuit if A does not, resulting in Nash equilibrium because both companies do not cooperate.
References
Chung, D. J., Seo, K., & Song, R. (2019). Does Apple Anchor a Shopping Mall? The Effect of the Technology Stores on the Formation of Market Structure. Harvard Business School Working Paper.
Erren, T. C., Shaw, D. M., & Morfeld, P. (2016). Analyzing the publish-or-perish paradigm with game theory: The prisoner’s Dilemma and a possible escape. Science and Engineering Ethics, 22(5).