BUSS1040 Economics for Business Decision Making
Added on 2020-05-04
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Running head: AUSTRALIAN ONLINE AND OFFLINE VIDEO ENTERTAINMENT 1Australian Online and Offline Video EntertainmentNameInstitution
AUSTRALIAN ONLINE AND OFFLINE VIDEO ENTERTAINMENT2AUSTRALIAN ONLINE AND OFFLINE VIDEO ENTERTAINMENTQuestion 1:In this first question a consideration of market for `over-the-top’ video entertainment asframed in 1990s and 1980s in Australia is made. The attention is paid to how they wereproviding offline video entertainment originally via autonomous rental video stores, and later viarental video chains like Blockbuster and Video Ezy. This consideration helps in the descriptionand definition of market structure in “over-the-top” market. From this is information the marketstructure was oligopoly. This is a structure whereby a few firms dominate as evident in the abovebackground. The market was only being shared between a few firms, and hence it was highlyconcentrated. One key feature of oligopoly is that independence and this is affirmed by thebackground above as there were independence video stores and rental video chains like VideoEzy and Blockbuster. Another key feature that was observed in the 1980s and 1990s was thatonly a few sellers existed in the market against the many buyers which further is an evidence thatthis was indeed an oligopoly market structure (Neary, 2016). The other feature affirmed was thatthe products had no close substitutes as only a few firms could offer them.
AUSTRALIAN ONLINE AND OFFLINE VIDEO ENTERTAINMENT3The oligopoly market structure is illustrated by the above kinked demand curve. Thereactions of competitors to the change in price relies on whether the price is increased orplunged. The elasticity of demand, and thus demand curve gradient, shall be different as well.The demand curve is kinked, at the present price. Even in presence of a huge increase in MC,price tends to stay fixed close to its initial position, provided high price elasticity of demand forany price surge (Forrest, King & Delfabbro, 2016). The prices can thus be determined using suchstrategies as predatory pricing, limit-pricing, collusion and cost-plus pricing.
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